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Ranking opportunity sets, averaging versus preference for freedom

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  • Tom POTOMS
  • Luc LAUWERS

Abstract

We introduce and axiomatize two quasi-orderings that extend preferences on a set to its power set. First, a modified version of indirect utility takes into account the number of maximal elements in the opportunity set. This rule meets Puppe's axiom of preference for freedom. Second, an averaging rule takes into account the number of non-maximal elements in the opportunity set. Such a rule satisfies the Gärdenfors principle. Axioms that involve no more than two alternatives capture the differences between the two rules.

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  • Tom POTOMS & Luc LAUWERS, 2013. "Ranking opportunity sets, averaging versus preference for freedom," Working Papers Department of Economics ces13.14, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces13.14
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