Are individuals random-utility maximizers? Or do individuals have private knowledge of shocks to their utility?<\/p>\n
“McFadden (1974) observed that the logit, probit, and similar discrete-choice models have two interpretations. The first interpretation is that of individual random utility. A decisionmaker draws a utility function at random to evaluate a choice situation. The distribution of choices then reflects the distribution of utility, which is the object of econometric investigation. The second interpretation is that of a population of decision makers. Each individual in the population has a deterministic utility function. The distribution of choices in the population reflects the population distribution of preferences. … One interpretation of this game theoretic approach is that the econometrician confronts a population of random-utility maximizers whose decisions are coupled. These models extend the notion of Nash equilibrium to random- utility choice. The other interpretation views an individual\u2019s shock as known to the individual but not to others in the population (or to the econometrician). In this interpretation, the Brock-Durlauf model is a Bayes-Nash equilibrium of a game with independent types, where the type of individual i is the pair (x_i, e_i). Information is such that the first component of each player i\u2019s type is common knowledge, while the second is known only to player i.” — Blume, Brock, Durlauf & Ioannides. 2011. Identification of Social Interactions<\/a>. Handbook of Social Economics, Volume 1B.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"
Are individuals random-utility maximizers? Or do individuals have private knowledge of shocks to their utility? “McFadden (1974) observed that the logit, probit, and similar discrete-choice models have two interpretations. The first interpretation is that of individual random utility. A decisionmaker draws a utility function at random to evaluate a choice situation. The distribution of choices […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[88,78,14],"tags":[],"class_list":["post-660","post","type-post","status-publish","format-standard","hentry","category-econometrics","category-markets","category-psychology"],"_links":{"self":[{"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/posts\/660","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/comments?post=660"}],"version-history":[{"count":5,"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/posts\/660\/revisions"}],"predecessor-version":[{"id":665,"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/posts\/660\/revisions\/665"}],"wp:attachment":[{"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/media?parent=660"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/categories?post=660"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.deaneckles.com\/blog\/wp-json\/wp\/v2\/tags?post=660"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}