Flexibility of Choice Versus Reduction of Ambiguity
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.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eddie Dekel, 1997.
"A Unique Subjective State Space for Unforeseen Contingencies,"
1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
- Karni, E. & Safra, Z., 1988.
"Behaviorally Consistent Optimal Stopping Rules,"
9-88, Tel Aviv.
- Ludwig, Alexander & Zimper, Alexander, 2004.
"Investment Behavior under Ambiguity: The Case of Pessimistic Decision Makers,"
Sonderforschungsbereich 504 Publications
04-31, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Ludwig, Alexander & Zimper, Alexander, 2006. "Investment behavior under ambiguity: The case of pessimistic decision makers," Mathematical Social Sciences, Elsevier, vol. 52(2), pages 111-130, September.
- Alexander Ludwig & Alexander Zimper, 2004. "Investment Behavior under Ambiguity: The Case of Pessimistic Decision Makers," MEA discussion paper series 04060, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Klaus Nehring, 1999. "Preference for Flexibility in a Savage Framework," Econometrica, Econometric Society, vol. 67(1), pages 101-120, January.
- Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2006.
Boston University - Department of Economics - Working Papers Series
WP2006-024, Boston University - Department of Economics.
- Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2005. "Temptation–Driven Preferences," Boston University - Department of Economics - Working Papers Series WP2005-005, Boston University - Department of Economics.
- Eddie Dekel & Barton Lipman & Aldo Rustichini, 2006. "Temptation–Driven Preferences," Discussion Papers 1423, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Faruk Gul & Wolfgang Pesendorfer, 2004.
"Self-Control and the Theory of Consumption,"
Econometric Society, vol. 72(1), pages 119-158, 01.
- Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
- Eric Danan & Anthony Ziegelmeyer, 2004. "Are preferences incomplete? An experimental study using flexible choices," Papers on Strategic Interaction 2004-23, Max Planck Institute of Economics, Strategic Interaction Group.
- Laibson, David, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(2), pages 443-77, May.
When requesting a correction, please mention this item's handle: RePEc:rza:wpaper:40. 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: (Yoemna Mosaval)
If references are entirely missing, you can add them using this form.