IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Dynamic Preference for Flexibility

Listed author(s):
  • R. Vijay Krishna
  • Philipp Sadowski
Registered author(s):

    Following Kreps (1979), we consider a decision maker who is uncertain about her future taste for immediate consumption. This uncertainty leaves the decision maker with a preference for flexibility: When choosing among menus containing alternatives for future choice, she weakly prefers menus with additional alternatives. Existing representations accommodating this choice pattern cannot address dynamic decision situations like a consumption savings problem. We provide representations of choice over continuation problems that are recursive and take the form of Bellman equations. Two specific models are axiomatized. They feature stationary and Markovian beliefs over future tastes, respectively. The parameters of the representations, which are relative intensities of tastes, beliefs over those tastes and the discount factor, are uniquely identified from behavior. We characterize a natural notion of ’greater preference for flexibility’ in terms of a stochastic order on beliefs and give an example of a Lucas tree economy, where a representative agent with greater preference for flexibility corresponds to larger price volatility in the sense of second order stochastic dominance.

    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:
    File Function: main text
    Download Restriction: no

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 10-68.

    in new window

    Length: 45
    Date of creation: 2010
    Handle: RePEc:duk:dukeec:10-68
    Contact details of provider: Postal:
    Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097

    Phone: (919) 660-1800
    Fax: (919) 684-8974
    Web page:

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:10-68. 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: (Department of Economics Webmaster)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.