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Preference for Flexibility in a Savage Framework

Author

Listed:
  • Klaus Nehring

Abstract

The authors study preferences over Savage acts that map states to opportunity sets and satisfy the Savage axioms. Preferences over opportunity sets may exhibit a preference for flexibility due to an implicit uncertainty about future preferences reflecting anticipated unforeseen contingencies. The main result of the paper characterizes maximization of the expected indirect utility in terms of an 'indirect stochastic dominance' axiom that expresses a preference for 'more opportunities in expectation.' The key technical tool of the paper, conjugate Mobius inversion, allows an alternative representation using Choquet integration and yields a simple proof of D. Kreps's (1979) classic result.

Suggested Citation

  • Klaus Nehring, 1999. "Preference for Flexibility in a Savage Framework," Econometrica, Econometric Society, vol. 67(1), pages 101-120, January.
  • Handle: RePEc:ecm:emetrp:v:67:y:1999:i:1:p:101-120
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    Citations

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    Cited by:

    1. Marie-Louise Vierø, 2009. "Exactly what happens after the Anscombe–Aumann race?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(2), pages 175-212, November.
    2. repec:spr:joecth:v:65:y:2018:i:3:d:10.1007_s00199-016-1025-9 is not listed on IDEAS
    3. Kraus, Alan & Sagi, Jacob S., 2006. "Inter-temporal preference for flexibility and risky choice," Journal of Mathematical Economics, Elsevier, vol. 42(6), pages 698-709, September.
    4. Barbera, S. & Bossert, W. & Pattanaik, P.K., 2001. "Ranking Sets of Objects," Cahiers de recherche 2001-02, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    5. Gorno, Leandro, 2016. "Additive representation for preferences over menus in finite choice settings," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 41-47.
    6. Stefania Minardi & Andrei Savochkin, 2016. "Subjective Contingencies and Limited Bayesian Updating," Working Papers w0222, Center for Economic and Financial Research (CEFIR).
    7. Ozdenoren, Emre, 2002. "Completing the State Space with Subjective States," Journal of Economic Theory, Elsevier, vol. 105(2), pages 531-539, August.
    8. Ortoleva, Pietro, 2013. "The price of flexibility: Towards a theory of Thinking Aversion," Journal of Economic Theory, Elsevier, vol. 148(3), pages 903-934.
    9. Larry G. Epstein, 2006. "An Axiomatic Model of Non-Bayesian Updating," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 413-436.
    10. Matthew Ryan, 2014. "Belief functions and preference for flexibility," Economics Bulletin, AccessEcon, vol. 34(1), pages 581-588.
    11. Arlegi, Ricardo & Nieto, Jorge, 2001. "Incomplete preferences and the preference for flexibility," Mathematical Social Sciences, Elsevier, vol. 41(2), pages 151-165, March.
    12. Hiroyuki Nakata, 2011. "Equivalent comparisons of information channels," Theory and Decision, Springer, vol. 71(4), pages 559-574, October.
    13. repec:spr:joecth:v:65:y:2018:i:4:d:10.1007_s00199-017-1043-2 is not listed on IDEAS
    14. Alon, Shiri, 2015. "Worst-case expected utility," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 43-48.
    15. Epstein, Larry G. & Seo, Kyoungwon, 2009. "Subjective states: A more robust model," Games and Economic Behavior, Elsevier, vol. 67(2), pages 408-427, November.
    16. Ani Guerdjikova & Alexander Zimper, 2008. "Flexibility of choice versus reduction of ambiguity," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(3), pages 507-526, April.
    17. Eric Danan & Ani Guerdjikova & Alexander Zimper, 2012. "Indecisiveness aversion and preference for commitment," Theory and Decision, Springer, vol. 72(1), pages 1-13, January.
    18. Takeoka, Norio, 2007. "Subjective probability over a subjective decision tree," Journal of Economic Theory, Elsevier, vol. 136(1), pages 536-571, September.
    19. Al-Najjar, Nabil I. & Casadesus-Masanell, Ramon & Ozdenoren, Emre, 2003. "Probabilistic representation of complexity," Journal of Economic Theory, Elsevier, vol. 111(1), pages 49-87, July.

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