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Flexibility of choice versus reduction of ambiguity

Author

Listed:
  • Alexander Zimper
  • Ani Guerdjikova

Abstract

This paper explores the problem of a social planner willing to improve the welfare of individuals who are unable to compare all available alternatives. The optimal decision trades off the individuals' desire for flexibility versus their aversion towards ambiguous choice situations. We introduce an axiom system that formalizes this idea. Our main result characterizes the preference maximizing opportunity set. It is a maximal set that consists of mutually comparable alternatives. It also has the property that it maximizes the sum of the distances between its ordered elements for some appropriate metric imposed on the set of possible choices.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alexander Zimper & Ani Guerdjikova, 2006. "Flexibility of choice versus reduction of ambiguity," ERSA Working Paper Series 040, Economic Research Southern Africa.
    • Handle: RePEc:rza:ersawp:040
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    JEL classification:

    • D69 - Microeconomics - - Welfare Economics - - - Other
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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