Preferences for Flexibility and Randomization under Uncertainty

Kota Saito

American Economic Review, 2015, vol. 105, issue 3, 1246-71

Abstract: An uncertainty-averse agent prefers betting on an event whose probability is known, to betting on an event whose probability is unknown. Such an agent may randomize his choices to eliminate the effects of uncertainty. For what sort of preferences does a randomization eliminate the effects of uncertainty? To answer this question, we investigate an agent's preferences over sets of acts. We axiomatize a utility function, through which we can identify the agent's subjective belief that a randomization eliminates the effects of uncertainty. (JEL D11, D81)

JEL-codes: D11 D81 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20131030
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.20131030 (application/pdf)
https://www.aeaweb.org/aer/ds/10503/20131030_ds.zip (application/zip)
https://www.aeaweb.org/aer/app/10503/20131030_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:105:y:2015:i:3:p:1246-71

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().