The Order-Dependent Luce Model

Abstract

I develop a simple axiomatic model that incorporates the order effect: the ordering of alternatives (e.g., ranking of universities, the location of products in a grocery store, the order of candidates on a ballot) affects choice frequencies. In my model, the probability of choosing an alternative is proportional to the utility of the alternative, similar to the Luce model. However, the utility of the alternative depends on the relative ordering of the alternative in the menu. I characterize this model by two weakenings of Luce’s axiom of independence of irrelevant alternatives. I discuss how to identify the ordering of alternatives from choice data when it is not observed. Finally, I apply my model to an optimal ordering problem and to experimental data on intertemporal choice. This paper was accepted by Manel Baucells, decision analysis.