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arXiv · 2403.10208

Irrational Random Utility Models

Daniele Caliari·Henrik Petri
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Abstract

The Random Utility Model (RUM) is the leading model to represent the aggregate choices of a heterogeneous population of preference maximizers. We show that if (and only if) preferences are sufficiently uncorrelated, RUM choices can also be generated by a population of decision makers who do not maximize any preference. In proving this result, we also characterize the general class of choices generated by such irrational populations, with applications beyond the RUM framework. We discuss the relevance of our results for the falsifiability of the rational interpretation of RUMs, the inference of individual rationality from aggregate choices, and the nature of welfare judgments.

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Daniele Caliari, Henrik Petri. 2024-03-15. Irrational Random Utility Models. https://arxiv.org/abs/2403.10208

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