Preference for flexibility in infinite horizon problems

Aldo Rustichini

Economic Theory, 2002, vol. 20, issue 4, 677-702

Abstract: We consider the extension of the classical problem of preference for flexibility to many periods. Preferences are defined over sets of infinite paths of choices. The main result provides a set of axioms on preferences that yield an additive representation over a subjective state space. This space is the set of preferences over choice today and feasible set tomorrow. The main new axiom, stochastic dominance, is a stronger form of the assumption of monotonicity.

Keywords: Preference for flexibility; Unforeseen contingencies; Dynamic programming. (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2002-03-21
Note: Received: September 11 2000; revised version: December 18, 2001
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Citations: View citations in EconPapers (7)

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