Preference for Flexibility in a Savage Framework

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Preference for Flexibility in a Savage Framework

Author Info

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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Publisher 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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Marie-Louise Vierø, 2009. "Exactly what happens after the Anscombe–Aumann race?," Economic Theory, Springer, vol. 41(2), pages 175-212, November. [Downloadable!] (restricted)
Larry Epstein, 2005. "An Axiomatic Model of Non-Bayesian Updating," RCER Working Papers 521, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
Other versions:
- Larry Epstein, 2002. "An Axiomatic Model of Non-Bayesian Updating," RCER Working Papers 498, University of Rochester - Center for Economic Research (RCER), revised Jan 2005. [Downloadable!]
- Larry G. Epstein, 2006. "An Axiomatic Model of Non-Bayesian Updating," Review of Economic Studies, Blackwell Publishing, vol. 73(2), pages 413-436, 04. [Downloadable!] (restricted)
BARBERA, Salvador & BOSSERT, Walter & PATTANAIK, Prasanta K., 2001. "Ranking Sets of Objects," Cahiers de recherche 2001-02, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
Other versions:
- Barbera, S. & Bossert, W. & Pattanaik, P.K., 2001. "Ranking Sets of Objects," Cahiers de recherche 2001-02, Centre interuniversitaire de recherche en économie quantitative, CIREQ.

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