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Preference for Flexibility in a Savage Framework

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  • Klaus Nehring

Abstract

The authors study preferences over Savage acts that map states to opportunity sets and satisfy the Savage axioms. Preferences over opportunity sets may exhibit a preference for flexibility due to an implicit uncertainty about future preferences reflecting anticipated unforeseen contingencies. The main result of the paper characterizes maximization of the expected indirect utility in terms of an 'indirect stochastic dominance' axiom that expresses a preference for 'more opportunities in expectation.' The key technical tool of the paper, conjugate Mobius inversion, allows an alternative representation using Choquet integration and yields a simple proof of D. Kreps's (1979) classic result.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 67 (1999)
Issue (Month): 1 (January)
Pages: 101-120

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Handle: RePEc:ecm:emetrp:v:67:y:1999:i:1:p:101-120

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Cited by:
  1. Larry Epstein, 2005. "An Axiomatic Model of Non-Bayesian Updating," RCER Working Papers 521, University of Rochester - Center for Economic Research (RCER).
  2. Eric Danan & Ani Guerdjikova & Alexander Zimper, 2009. "Indecisiveness aversion and preference for commitment," Working Papers 157, Economic Research Southern Africa.
  3. Epstein, Larry G. & Seo, Kyoungwon, 2009. "Subjective states: A more robust model," Games and Economic Behavior, Elsevier, vol. 67(2), pages 408-427, November.
  4. BARBERA, Salvador & BOSSERT, Walter & PATTANAIK, Prasanta K., 2001. "Ranking Sets of Objects," Cahiers de recherche 2001-02, Universite de Montreal, Departement de sciences economiques.
  5. Ozdenoren, Emre, 2002. "Completing the State Space with Subjective States," Journal of Economic Theory, Elsevier, vol. 105(2), pages 531-539, August.
  6. Hiroyuki Nakata, 2011. "Equivalent comparisons of information channels," Theory and Decision, Springer, vol. 71(4), pages 559-574, October.
  7. Ani Guerdjikova & Alexander Zimper, 2005. "Flexibility of Choice Versus Reduction of Ambiguity," Working Papers 40, Economic Research Southern Africa.
  8. Matthew Ryan, 2014. "Belief functions and preference for flexibility," Economics Bulletin, AccessEcon, vol. 34(1), pages 581-588.
  9. Al-Najjar, Nabil I. & Casadesus-Masanell, Ramon & Ozdenoren, Emre, 2003. "Probabilistic representation of complexity," Journal of Economic Theory, Elsevier, vol. 111(1), pages 49-87, July.
  10. Kraus, Alan & Sagi, Jacob S., 2006. "Inter-temporal preference for flexibility and risky choice," Journal of Mathematical Economics, Elsevier, vol. 42(6), pages 698-709, September.
  11. Takeoka, Norio, 2007. "Subjective probability over a subjective decision tree," Journal of Economic Theory, Elsevier, vol. 136(1), pages 536-571, September.
  12. Arlegi, Ricardo & Nieto, Jorge, 2001. "Incomplete preferences and the preference for flexibility," Mathematical Social Sciences, Elsevier, vol. 41(2), pages 151-165, March.
  13. Marie-Louise Vierø, 2009. "Exactly what happens after the Anscombe–Aumann race?," Economic Theory, Springer, vol. 41(2), pages 175-212, November.

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