Preference for Flexibility and the Opportunities of Choice

Salvador Barberà () and Birgit Grodal

No 02-22, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: A decision-maker exhibits preference for flexibility if he always prefers any set of alternatives to its subsets, even when two of them contain the same best element. Desire for flexibility can be explained as the consequence of the agent’s uncertainty along a two-stage process, where he must first preselect a subset of alternatives from which to make a final choice later on. We investigate conditions on the rankings of subsets that are compatible with the following assumptions: (1) the agent is endowed with a VN-M utility function on alternatives, (2) the agent attaches a subjective probability to the survival of each subset of alternatives, and (3) the agent will make a best choice out of any set which becomes available, and ranks sets ex-ante in terms of the expected utility of the best choices within them. We first prove that any total ordering respecting set inclusion is rationalizable in these terms. This result is essentially the same obtained by Kreps (1979) under an alternative interpretation. We also show that we cannot learn anything about the underlying utilities of agents unless we impose further restrictions on the admissible distributions of survival probabilities. Then we investigate the additional consequences of assuming that the survival probabilities of individual alternatives are independently distributed. We prove that this reduces significantly the class of set rankings which can be rationalized and that then one can infer some of the characteristics of the agent’s preferences. We offer a full characterization for the case of three alternatives. We also provide necessary conditions for rationalizability in the general case.

Pages: 14 pages
Date: 2002-11
New Economics Papers: this item is included in nep-dcm
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/2002/0222.pdf/ (application/pdf)

Related works:
Journal Article: Preference for flexibility and the opportunities of choice (2011)
Working Paper: Preference for Flexibility and the Opportunities of Choice (2003)
Working Paper: Preference for Flexibility and the Opportunities of Choice (2003)
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:kud:kuiedp:0222

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().