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Preference for Flexibility and Bayesian Updating

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  • Gil Riella

Abstract

Dekel, Lipman, and Rustichini (2001) show that preferences over menus of lotteries can be represented by the use of a unique subjective state space and a prior. We provide foundations for Bayesian updating in such a setup. When the subjective state space is finite, we show that Bayesian updating is linked to a comparative theory of preference for flexibility. Without the finiteness of the subjective state space, Bayesian updating is characterized by a more technical condition.

Suggested Citation

  • Gil Riella, 2008. "Preference for Flexibility and Bayesian Updating," Working Papers Series 177, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:177
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    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps177.pdf
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    Cited by:

    1. Fernanda Senra de Moura & Gil Riella, 2021. "Preference for flexibility and dynamic consistency with incomplete preferences," Theory and Decision, Springer, vol. 90(2), pages 171-181, March.

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