Advanced Search
MyIDEAS: Login

Conditional Preference for Flexibility: Eliciting Beliefs from Behavior

Contents:

Author Info

  • Sadowski, Philipp

Abstract

Following Kreps (1979), we consider a decision maker with uncertain beliefs about her own future taste. This uncertainty leaves the decision maker with preference for flexibility: When choosing among menus containing alternatives for future choice, she weakly prefers larger menus. Existing representations accommodating this choice pattern cannot distinguish tastes (indexed by a subjective state space) and beliefs (a probability measure over the subjective states) as different concepts, making it impossible to relate parameters of the representation to choice behavior. We allow choice among menus to depend on exogenous states, interpreted as information. Our axioms yield a representation that uniquely identifies beliefs, provided the impact of information on choice is rich. The result is suggested as a choice theoretic foundation for the assumption, commonly made in the incomplete contracting literature, that contracting parties, who know each other's ranking of contracts, also share beliefs about each others future tastes in the face of unforeseen contingencies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/8614/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8614.

as in new window
Length:
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:pra:mprapa:8614

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Preference for Flexibility; Uniqueness; Contracts; Subjective Uncertainty;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. 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.
  2. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," NBER Working Papers 6726, National Bureau of Economic Research, Inc.
  3. E. Karni & Ph. Mongin, 1997. "On the determination of subjective probability by choices," THEMA Working Papers 97-37, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Klaus Nehring, 2003. "Preference for Flexibility and Freedom of Choice in a Savage Framework," Working Papers 9615, University of California, Davis, Department of Economics.
  5. Grant, S. & Karni, E., 2002. "Why Does it Matter that Beliefs and Valuations be Correctly Represented?," Discussion Paper 2002-12, Tilburg University, Center for Economic Research.
  6. Larry Epstein, 2002. "An Axiomatic Model of Non-Bayesian Updating," RCER Working Papers 498, University of Rochester - Center for Economic Research (RCER), revised Jan 2005.
  7. Eddie Dekel, 1997. "A Unique Subjective State Space for Unforeseen Contingencies," Discussion Papers 1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Edi Karni, 2007. "Bayesian Decision Theory and the Representation of Beliefs," Discussion Paper Series dp444, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  9. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  10. Ariel Rubinstein & Yuval Salant, 2007. "(A,f) Choice with Frames," Levine's Bibliography 843644000000000029, UCLA Department of Economics.
  11. Maskin, Eric & Tirole, Jean, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 83-114, January.
  12. Ozdenoren, Emre, 2002. "Completing the State Space with Subjective States," Journal of Economic Theory, Elsevier, vol. 105(2), pages 531-539, August.
  13. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  14. Eddie eckel & Barton L Lipman & Aldo Rustichini & Todd Sarver, 2005. "Representing Preferences with a Unique Subjective State Space: Corrigendum," Boston University - Department of Economics - Working Papers Series WP2005-042, Boston University - Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:8614. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.