Conditional Preference for Flexibility: Eliciting Beliefs from Behavior

Philipp Sadowski

MPRA Paper from University Library of Munich, Germany

Abstract: Following Kreps (1979), we consider a decision maker with uncertain beliefs about her own future taste. This uncertainty leaves the decision maker with preference for flexibility: When choosing among menus containing alternatives for future choice, she weakly prefers larger menus. Existing representations accommodating this choice pattern cannot distinguish tastes (indexed by a subjective state space) and beliefs (a probability measure over the subjective states) as different concepts, making it impossible to relate parameters of the representation to choice behavior. We allow choice among menus to depend on exogenous states, interpreted as information. Our axioms yield a representation that uniquely identifies beliefs, provided the impact of information on choice is rich. The result is suggested as a choice theoretic foundation for the assumption, commonly made in the incomplete contracting literature, that contracting parties, who know each other's ranking of contracts, also share beliefs about each others future tastes in the face of unforeseen contingencies.

Keywords: Preference for Flexibility; Uniqueness; Contracts; Subjective Uncertainty (search for similar items in EconPapers)
JEL-codes: D01 D80 D81 D82 D83 D84 D86 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-cdm, nep-evo and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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