Les Cahiers de Recherche - HEC Paris
Deferral, incomplete preferences and confidence
Abstract: Author's abstract: A theory of when to defer a decision is
proposed, according to which a decision maker defers if and only if his
confidence in the relevant beliefs does not match up to the stakes involved
in the decision. It uses the model of confidence in beliefs and the notion
of stakes introduced in Hill (2010).
Firstly, a representation of
deferral of binary choices is proposed and axiomatised; it can
alternatively be considered as a representation of incomplete preferences,
where indeterminacy of preferences is interpreted as taking the deferral
option. Then the question of what the decision maker would do if he was not
allowed to defer is studied; mild axioms governing the relationship between
preferences in the presence and absence of a deferral option characterise a
simple model of how forced choice relates to choice where deferral is
possible. Finally, the results are extended to deferral of choices from
non-binary menus. Compared to existing accounts of deferral, the theory
proposed here is unique in analysing deferral entirely in terms of the
attitudes of the agent at the moment of choice, rather than his expectation
about his or others’ future attitudes, for example. Preliminary axiomatic
analysis shows that this difference is behaviourally meaningful.
Keywords: Incomplete preferences; deferral; confidence; multiple priors; revealed preference; (follow links to similar papers)
JEL-Codes: D01; D81; (follow links to similar papers)
68 pages, February 17, 2011
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