A Unique Subjective State Space for Unforeseen Contingencies
AbstractWe axiomatically characterize a representation of preferences over opportunity sets which exhibit a preference for flexibility, interpreted as a model of unforeseen contingencies. In this representation, the agent acts as if she had a coherent prior over a set of possible future preferences, each of which is an expected-utility preference. We show that the state space is essentially unique given the restriction that all future preferences are expected-utility preferences and is minimal even without this restriction. Finally, because the state space is identified, the additivity across states is meaningful in the sense that all representations are intrinsically additive.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1202.
Date of creation: Nov 1997
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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- Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
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