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Random Utility Model
In economics, a random utility model (RUM), also called stochastic utility model, is a mathematical description of the preferences of a person, whose choices are not deterministic, but depend on a random state variable. Background A basic assumption in classic economics is that the choices of a rational person choices are guided by a Preference (economics), preference relation, which can usually be described by a utility function. When faced with several alternatives, the rational person will choose the alternative with the highest utility. The utility function is not visible; however, by observing the choices made by the person, we can "reverse-engineer" his utility function. This is the goal of revealed preference theory. In practice, however, people are not rational. Ample empirical evidence shows that, when faced with the same set of alternatives, people may make different choices. To an outside observer, their choices may appear random. One way to model this behavior is ca ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interactions of Agent (economics), economic agents and how economy, economies work. Microeconomics analyses what is viewed as basic elements within economy, economies, including individual agents and market (economics), markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyses economies as systems where production, distribution, consumption, savings, and Expenditure, investment expenditure interact; and the factors of production affecting them, such as: Labour (human activity), labour, Capital (economics), capital, Land (economics), land, and Entrepreneurship, enterprise, inflation, economic growth, and public policies that impact gloss ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
