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 M 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 California Davis - Department of Economics in its series Department of Economics with number 96-15.
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Postal: University of California Davis - Department of Economics. One Shields Ave., California 95616-8578
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- Klaus Nehring, 2003. "Preference for Flexibility and Freedom of Choice in a Savage Framework," Working Papers 9615, University of California, Davis, Department of Economics.
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- Sadowski, Philipp, 2008. "Conditional Preference for Flexibility: Eliciting Beliefs from Behavior," MPRA Paper 8614, University Library of Munich, Germany.
- Philipp Sadowski, 2011. "Contingent Preference for Flexibility: Eliciting Beliefs from Behavior," Levine's Working Paper Archive 661465000000001189, David K. Levine.
- Epstein, Larry G. & Seo, Kyoungwon, 2009. "Subjective states: A more robust model," Games and Economic Behavior, Elsevier, vol. 67(2), pages 408-427, November.
- Dekel, Eddie & Lipman, Barton L. & Rustichini, Aldo, 1998. "Recent developments in modeling unforeseen contingencies," European Economic Review, Elsevier, vol. 42(3-5), pages 523-542, May.
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