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The Preference for Monotone Decision Problems

Author

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  • Bernard Sinclair-Desgagné

Abstract

This paper spells out conditions under which a rational decisionmaker will commit ex ante to certain choice restrictions, in order to get extra information about an uncertain state of nature. We show that the envisioned limitations will then bring the decision-maker to solve a monotone decision problem. This provides a first rationale for the observed recurrence of this type of problem in economic life. From another angle, the analysis also explains why individuals and organizations resort to automatic responses and routines in some circumstances, and how this contributes to shape their environment.

Suggested Citation

  • Bernard Sinclair-Desgagné, 2018. "The Preference for Monotone Decision Problems," Cahiers du GREThA (2007-2019) 2018-15, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    • Handle: RePEc:grt:wpegrt:2018-15
    as

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    File URL: http://cahiersdugretha.u-bordeaux.fr/2018/2018-15.pdf
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    References listed on IDEAS

    as
    1. Wouter Dessein & Andrea Galeotti & Tano Santos, 2016. "Rational Inattention and Organizational Focus," American Economic Review, American Economic Association, vol. 106(6), pages 1522-1536, June.
    2. Athey, Susan & Levin, Jonathan, 2018. "The value of information in monotone decision problems," Research in Economics, Elsevier, vol. 72(1), pages 101-116.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. Colin Camerer & George Loewenstein & Drazen Prelec, 2005. "Neuroeconomics: How Neuroscience Can Inform Economics," Journal of Economic Literature, American Economic Association, vol. 43(1), pages 9-64, March.
    5. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monotone decision problems; Rational inattention; Design attributes; Routines;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other

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