This paper introduces a semiparametric estimation method for Polychotomous Choice models. The method does not require a parametric structure for the systematic subutility of observable exogenous variables. The distribution of the random terms is assumed to be known up to a finite-dimensional parameter vector. In contrast, previous semiparametric methods of estimating discrete choice models have concentrated on relaxing parametric subutility parametrically specified. The systematic subutility is assumed to possess properties such as monotonicity and concavity that are typically assumed in microeconomic theory. The estimator for the systematic subutility and the parameter vector of the distribution is shown to be strongly consistent. A computational technique to calculate the estimators is developed. Copyright 1991 by The Econometric Society.

It seems inconsistent to model boundedly rational action choice by assuming that the agent chooses the optimal decision procedure. This criticism is not avoided by assuming that he chooses the optimal procedure to choose a procedure to . . . to choose an action. The author shows that, properly interpreted, this regress, continued transfinitely, generates a model representing the agent's perception of all his options, including every way to refine his perceptions. In this model, the agent surely must choose the perceived best option. Hence, it is not inconsistent to model limited rationality by assuming that the agent uses the "optimal" decision procedure. Copyright 1991 by The Econometric Society.

The authors examine the effects of renegotiation in an agency relationship. They show how renegotiation affects (1) the set of actions the principal can induce the agent to take and (2) the cost of implementing a given action. The authors show that, when the principal receives an unverifiable signal of the agent's action, renegotiation can improve welfare. This result stands in contrast to earlier findings that renegotiation lowers welfare when the principal receives no signal about the agent's action prior to renegotiation. Copyright 1991 by The Econometric Society.

The independence axiom of expected utility theory has recently been weakened to the betweenness axiom. In this paper, an even weaker axiom, called mixture symmetry, is presented. The corresponding functional structure is such that utility is a betweenness functional on part of this domain and quadratic in probabilities elsewhere. The experimental evidence against betweenness provides one motivation for the more general theory presented here. Another advantage of the mixture symmetric class of utility functions is that it is sufficiently flexible to permit the disentangling of attitudes toward risk and toward randomization. Copyright 1991 by The Econometric Society.