The Focal Luce Model
- American Economic Journal: Microeconomics (Forthcoming)
We introduce the Focal Luce Model (FLM), a random choice
model that generalizes Luce's (1959) model (multinomial logit) to
account for menu-dependent focality of alternatives. In the FLM,
focal alternatives are relatively more likely to be chosen even after taking utilities into account. The FLM captures a variety of
bounded rationality models while behaviorally distinguishing between what is focal and the magnitude of the bias from focality.
We show how to identify utilities, focal sets, and bias terms from
choice frequencies, behaviorally characterize the FLM by weakening Luce's IIA, and apply our model to choice data and games.
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