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How To Extend A Model Of Probabilistic Choice From Binary Choices To Choices Among More Than Two Alternatives

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Executive Summary

This paper presents an algorithm that extends a binary choice model to choice among multiple alternatives. Both neoclassical microeconomic theory and Luce choice model are consistent with the proposed algorithm. The algorithm is compatible with several empirical findings (asymmetric dominance and attraction effects) that cannot be explained within standard models. Many popular models of probabilistic choice such as the Fechner model of random errors (Fechner, 1860; Hey and Orme, 1994; Blavatskyy, 2008) are developed for binary choice problems because binary choice tasks are frequently used in empirical (especially experimental) research. However, many applications in the theory of individual demand, operations research, social choice, political economy and etc.

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