Preference for Flexibility and Freedom of Choice in a Savage Framework
AbstractIn this paper, we study preferences over Savage acts that map states to opportunity sets. Conditional preferences over opportunity sets may be inconsistent with indirect-utility maximization due to implicit uncertainty about future preferences (preference for flexibility), or to an intrinsic preference for freedom of choice. On a flexibility interpretation, the main result characterizes preferences based on maximizing the expected indirect utility in terms of an ""Indirect Stochastic Dominance"" axiom. The relevance of the result to a freedom-of-choice context is established on the basis of a novel multi-attribute conceptualization of the notion of effective freedom of choice; the theorem delivers an additive multi-attribute representation with optimal uniqueness properties. The key technical tool of the paper, a version of MÅ¡bius inversion has been imported from the theory of (non-additive) ""belief-functions;"" it also yields a simple and intuitive proof of Kreps''s (1979) classic result.
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Bibliographic InfoPaper provided by University of California, Davis, Department of Economics in its series Working Papers with number 9615.
Date of creation: 08 Jan 2003
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- Klaus Nehring, . "Preference For Flexibility And Freedom Of Choice In A Savage Framework," Department of Economics 96-15, California Davis - Department of Economics.
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- Epstein, Larry G. & Seo, Kyoungwon, 2009. "Subjective states: A more robust model," Games and Economic Behavior, Elsevier, vol. 67(2), pages 408-427, November.
- Philipp Sadowski, 2011. "Contingent Preference for Flexibility: Eliciting Beliefs from Behavior," Levine's Working Paper Archive 661465000000001189, David K. Levine.
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- Sadowski, Philipp, 2008. "Conditional Preference for Flexibility: Eliciting Beliefs from Behavior," MPRA Paper 8614, University Library of Munich, Germany.
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