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Deferral, incomplete preferences and confidence

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Author Info

  • Hill, Brian

    ()
    (HEC Paris)

Abstract

Author's abstract: A theory of when to defer a decision is proposed, according to which a decision maker defers if and only if his confidence in the relevant beliefs does not match up to the stakes involved in the decision. It uses the model of confidence in beliefs and the notion of stakes introduced in Hill (2010). Firstly, a representation of deferral of binary choices is proposed and axiomatised; it can alternatively be considered as a representation of incomplete preferences, where indeterminacy of preferences is interpreted as taking the deferral option. Then the question of what the decision maker would do if he was not allowed to defer is studied; mild axioms governing the relationship between preferences in the presence and absence of a deferral option characterise a simple model of how forced choice relates to choice where deferral is possible. Finally, the results are extended to deferral of choices from non-binary menus. Compared to existing accounts of deferral, the theory proposed here is unique in analysing deferral entirely in terms of the attitudes of the agent at the moment of choice, rather than his expectation about his or others’ future attitudes, for example. Preliminary axiomatic analysis shows that this difference is behaviourally meaningful.

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File URL: http://www.hec.fr/heccontent/download/4738/114734/version/2/file/HILL_CR_940.pdf
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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 940.

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Length: 68 pages
Date of creation: 17 Feb 2011
Date of revision:
Handle: RePEc:ebg:heccah:0940

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Related research

Keywords: Incomplete preferences; deferral; confidence; multiple priors; revealed preference;

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References

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  1. Dhar, Ravi, 1997. " Consumer Preference for a No-Choice Option," Journal of Consumer Research, University of Chicago Press, vol. 24(2), pages 215-31, September.
  2. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  3. Nehring, Klaus, 2009. "Imprecise probabilistic beliefs as a context for decision-making under ambiguity," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1054-1091, May.
  4. Eliaz, Kfir & Ok, Efe A., 2006. "Indifference or indecisiveness? Choice-theoretic foundations of incomplete preferences," Games and Economic Behavior, Elsevier, vol. 56(1), pages 61-86, July.
  5. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  6. Kopylov, Igor, 2009. "Choice deferral and ambiguity aversion," Theoretical Economics, Econometric Society, vol. 4(2), June.
  7. Sen, Amartya, 1993. "Internal Consistency of Choice," Econometrica, Econometric Society, vol. 61(3), pages 495-521, May.
  8. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  9. Kopylov, Igor, 2009. "Finite additive utility representations for preferences over menus," Journal of Economic Theory, Elsevier, vol. 144(1), pages 354-374, January.
  10. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October.
  11. Mandler, Michael, 2009. "Indifference and incompleteness distinguished by rational trade," Games and Economic Behavior, Elsevier, vol. 67(1), pages 300-314, September.
  12. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
  13. Amos Tversky & Itamar Simonson, 1993. "Context-Dependent Preferences," Management Science, INFORMS, vol. 39(10), pages 1179-1189, October.
  14. Sen, Amartya K, 1971. "Choice Functions and Revealed Preference," Review of Economic Studies, Wiley Blackwell, vol. 38(115), pages 307-17, July.
  15. Faro, José Heleno, 2011. "Variational Bewley Preferences," Insper Working Papers wpe_258, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  16. Itzhak Gilboa & Fabio Maccheroni & Massimo Marinacci & David Schmeidler, 2010. "Objective and Subjective Rationality in a Multiple Prior Model," Econometrica, Econometric Society, vol. 78(2), pages 755-770, 03.
  17. Efe A. Ok & Pietro Ortoleva & Gil Riella, 2012. "Incomplete Preferences Under Uncertainty: Indecisiveness in Beliefs versus Tastes," Econometrica, Econometric Society, vol. 80(4), pages 1791-1808, 07.
  18. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
  19. Tsogbadral Galaabaatar & Edi Karni, 2010. "Objective and Subjective Expected Utility with Incomplete Preferences," Economics Working Paper Archive 572, The Johns Hopkins University,Department of Economics.
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