Recursive Stochastic Choice
45 Pages Posted: 22 Sep 2013
Date Written: August 15, 2013
We characterize two sorts of stochastic choice rules in which the agent makes current decisions using a forward-looking value function that takes future randomizations into account. Both sorts of rules generalize logistic choice, and are equivalent to it in static problems. The rules differ in how the agent views future choice sets and how he views his future randomizations. One rule is equivalent to the discounted logit used in applied work, and exhibits a “preference for flexibility;” the other is “error-averse” and penalizes the addition of undesirable choices to a menu.
Suggested Citation: Suggested Citation