The Luce Model, Regularity, and Choice Overload

TL;DR

This paper introduces the General Threshold Luce model (GTLM) to analyze regularity violations in choice behavior, identifying conditions for choice overload and disentangling its underlying causes, with implications for decision-making welfare.

Contribution

It characterizes regularity within GTLM, provides necessary and sufficient conditions for choice overload, and clarifies the roles of discriminatory power and limited attention.

Findings

GTLM characterizes regularity violations in choice models.

Necessary and sufficient conditions for choice overload are identified.

Disentangles causes: low discriminatory power and limited attention.

Abstract

We characterize regularity (Block & Marschak, 1960) within a novel stochastic model: the General Threshold Luce model [GTLM]. We apply our results to study choice overload, identified by regularity violations that impose a welfare cost on the decision-maker. Generalizing our characterization results, we identify necessary and sufficient conditions for choice overload within GTLMs and, in doing so, disentangle two well-known causes: low discriminatory power (Frick, 2016) and limited attention (Lleras et al., 2017).