We consider random choice rules that, by satisfying a weak form of Luce's choice axiom, embody a form probabilistic rationality. We show that for this important class of stochastic choices, the law of demand for normal goods-arguably the main result of traditional consumer theory-continues to hold on average when strictly dominated alternatives are dismissed.
Law of demand and stochastic choice
Cerreia Vioglio, Simone;Maccheroni, Fabio
;Marinacci, Massimo;Rustichini, Aldo
2022
Abstract
We consider random choice rules that, by satisfying a weak form of Luce's choice axiom, embody a form probabilistic rationality. We show that for this important class of stochastic choices, the law of demand for normal goods-arguably the main result of traditional consumer theory-continues to hold on average when strictly dominated alternatives are dismissed.
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