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Indecisiveness aversion and preference for commitment

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  • Eric Danan Ani Guerdjikovaz Alexander Zimper

    (Université de Cergy-Pontoise, THEMA, 33 boulevard du Port, F-95000 Cergy-Pontoise, Cornell University, Department of Economics, Uris Hall 462, Ithaca, NY 14853, USA, University of Johannesburg, Department of Economics and Econometrics, PO Box 524 Aucland Park, 2006 Johannesburg, South Africa)

Abstract

We present a system of behavioral axioms for preferences over menus that is motivated by three assumptions. First, the decision maker is uncertain ex ante (i.e. at the time of choosing a menu) about her ex post (i.e. at the time of choosing an option within her chosen menu) preferences over options, and she anticipates that this subjective uncertainty will only resolve after the ex post stage. Second, she is averse to ex post indecisiveness (i.e. to having to choose between options that she cannot rank with certainty). Third, when evaluating a menu she discards options that are dominated (i.e. inferior to another option whatever her ex post preferences may be) and restricts attention to the undominated ones. Under these assumptions, the decision maker has a preference for commitment in the sense of preferring menus with fewer undominated alternatives. We derive a representation in which the decision maker's uncertainty about her ex post preferences is captured by means of a subjective state space, which in turn determines which options are undominated in a given menu, and in which the decision maker fears, whenever indecisive, to choose an option that will turn out to be the worst (undominated) one according to the realization of her ex post preferences.

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Bibliographic Info

Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2009-04.

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Date of creation: 2009
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Handle: RePEc:ema:worpap:2009-04

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Keywords: Opportunity sets; subjective uncertainty; indecisiveness; dominance;

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References

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  1. Juan Dubra & Fabio Maccheroni & Efe Oki, 2001. "Expected utility theory without the completeness axiom," ICER Working Papers - Applied Mathematics Series, ICER - International Centre for Economic Research 11-2001, ICER - International Centre for Economic Research.
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  3. Ani Guerdjikova & Alexander Zimper, 2008. "Flexibility of choice versus reduction of ambiguity," Social Choice and Welfare, Springer, Springer, vol. 30(3), pages 507-526, April.
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  7. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers, Economics Department, Princeton University 99f1, Economics Department, Princeton University.
  8. Ozdenoren, Emre, 2002. "Completing the State Space with Subjective States," Journal of Economic Theory, Elsevier, Elsevier, vol. 105(2), pages 531-539, August.
  9. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, Econometric Society, vol. 47(3), pages 565-77, May.
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  12. Epstein, Larry G. & Marinacci, Massimo & Seo, Kyoungwon, 2007. "Coarse contingencies and ambiguity," Theoretical Economics, Econometric Society, Econometric Society, vol. 2(4), December.
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  14. Ortoleva, Pietro, 2008. "The Price of Flexibility: Towards a Theory of Thinking Aversion," MPRA Paper 12242, University Library of Munich, Germany.
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Cited by:
  1. Özgür Evren, 2012. "Scalarization Methods and Expected Multi-Utility Representations," Working Papers w0174, Center for Economic and Financial Research (CEFIR).

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