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48
Rational Choice with Status Quo Bias
, 2003
"... Motivated by the empirical findings concerning the importance of one’s current situation on her choice behavior, the main objective of this paper is to propose a rational choice theory that allows for the presence of a status quo bias, and that incorporates the standard choice theory as a special ca ..."
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Cited by 27 (5 self)
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Motivated by the empirical findings concerning the importance of one’s current situation on her choice behavior, the main objective of this paper is to propose a rational choice theory that allows for the presence of a status quo bias, and that incorporates the standard choice theory as a special case. We follow a revealed preference approach, and obtain two nested models of rational choice that allow phenomena like the status quo bias and the endowment effect, and that are applicable in any choice situation to which the standard (static) choice model applies.
Anchored Preference Relations
, 2003
"... This paper explores the implications of a simple and intuitive restriction on reference dependent preferences assuming the status quo serves as the reference point. The condition imposed rules out situations in which a decision maker has a choice between two prospects, selects one, subsequently chan ..."
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Cited by 25 (1 self)
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This paper explores the implications of a simple and intuitive restriction on reference dependent preferences assuming the status quo serves as the reference point. The condition imposed rules out situations in which a decision maker has a choice between two prospects, selects one, subsequently changes her mind and selects the other – even if the change is costly. It is shown that a surprising number of models in a riskless and risky setting violate this behavioral assumption, including Cumulative Prospect Theory as well as any theory exhibiting local nonsatiation in which all reference dependent indifference surfaces are smooth. It is also shown that one can construct simple alternative models that do satisfy the condition, axiomatically derived or otherwise. These alternative theories take the form of maxmin representations over a set of expected (or Choquetexpected) utility differences, where utility difference is measured between the prospect evaluated and the reference point.
Shape of Incomplete Preferences.
 Proceedings of the Third International Symposium on Imprecise Probabilities and Their Applications, Carleton Scienti c Proceedings in Informatics
, 2003
"... Abstract Incomplete preferences provide the epistemic foundation for models of imprecise subjective probabilities and utilities that are used in robust Bayesian analysis and in theories of bounded rationality. This paper presents a simple axiomatization of incomplete preferences and characterizes t ..."
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Cited by 13 (2 self)
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Abstract Incomplete preferences provide the epistemic foundation for models of imprecise subjective probabilities and utilities that are used in robust Bayesian analysis and in theories of bounded rationality. This paper presents a simple axiomatization of incomplete preferences and characterizes the shape of their representing sets of probabilities and utilities. Deletion of the completeness assumption from the axiom system of Anscombe and Aumann yields preferences represented by a convex set of statedependent expected utilities, of which at least one must be a probability/utility pair. A strengthening of the stateindependence axiom is needed to obtain a representation purely in terms of a set of probability/utility pairs.
Objective and subjective expected utility with incomplete preferences, working paper
, 2010
"... Abstract This paper extends the subjective expected utility model of decision making under uncertainty to include incomplete beliefs and tastes. The main results are two axiomatizations of the multiprior expected multiutility representations of preference relation under uncertainty. The paper als ..."
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Cited by 12 (3 self)
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Abstract This paper extends the subjective expected utility model of decision making under uncertainty to include incomplete beliefs and tastes. The main results are two axiomatizations of the multiprior expected multiutility representations of preference relation under uncertainty. The paper also introduces new axiomatizations of Knightian uncertainty and expected multiutility model with complete beliefs.
Incomplete Preferences under Uncertainty: Indecisiveness in Beliefs vs. Tastes
, 2008
"... We investigate the classical AnscombeAumann model of decisionmaking under uncertainty without assuming the completeness axiom. We deduce the exact nature of preferences in this setup, and give a simple example that shows why one cannot use stateindependent utility functions to represent such pref ..."
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Cited by 11 (2 self)
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We investigate the classical AnscombeAumann model of decisionmaking under uncertainty without assuming the completeness axiom. We deduce the exact nature of preferences in this setup, and give a simple example that shows why one cannot use stateindependent utility functions to represent such preferences (even for those that are separable and monotonic). In turn, we distinguish between the dual traits of “indecisiveness in beliefs ” and “indecisiveness in tastes.” The former is captured by the Knightian Uncertainty model while the latter by the singleprior expected multiutility model. We show how these dual models would jointly obtain on the basis of an ambiguity aversion property, and then show how each model may be deduced from this result in isolation. As an application, we provide a new characterization of the AnscombeAumann representation of a preference relation in which we obtain the completeness and monotonicity hypotheses as consequences of a standard ambiguity aversion axiom and completeness of risk preferences alone.
On the MultiUtility Representation of Preference Relations
, 2008
"... We develop the ordinal theory of (semi)continuous multiutility representation for incomplete preference relations. We investigate the cases in which the representing sets of utility functions are either arbitrary or finite, and those cases in which the maps contained in these sets are required to b ..."
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Cited by 10 (1 self)
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We develop the ordinal theory of (semi)continuous multiutility representation for incomplete preference relations. We investigate the cases in which the representing sets of utility functions are either arbitrary or finite, and those cases in which the maps contained in these sets are required to be (semi)continuous. With the exception of the case where the representing set is required to be finite, we find that the requirements of such representations are surprisingly weak, pointing to the wide range of applicability of the representation theorems reported here.
Status quo maintenance reconsidered: Changing or incomplete preferences?
 J
, 2004
"... After reviewing the evidence for status quo maintenance (SQM), I consider how to reconcile SQM with traditional consumer theory. Behavioural economists usually let agents’ preferences change as a function of their endowments, treating the same person with different endowments as a set of distinct ag ..."
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Cited by 10 (4 self)
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After reviewing the evidence for status quo maintenance (SQM), I consider how to reconcile SQM with traditional consumer theory. Behavioural economists usually let agents’ preferences change as a function of their endowments, treating the same person with different endowments as a set of distinct agents. Many properties of preferences then become immune to empirical test and it becomes impossible to judge whether an agent’s decisions make the agent better or worse off. This impedes prediction of when decision rules are likely to change. SQM can alternatively be explained with unchanging preferences if preferences are incomplete. SQM is then consistent with selfinterest and there is no reason why it should not persist.
A model of procedural decision making in the presence of risk, Internat
 Econ. Rev
"... We introduce a procedural model of risky choice in which an individual is endowed with a core preference relation that may be highly incomplete. She can, however, derive further rankings of alternatives from her core preferences by means of a procedure based on the independence axiom. We find that t ..."
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Cited by 7 (1 self)
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We introduce a procedural model of risky choice in which an individual is endowed with a core preference relation that may be highly incomplete. She can, however, derive further rankings of alternatives from her core preferences by means of a procedure based on the independence axiom. We find that the preferences that are generated from an initial set of rankings according to this procedure can be represented by means of a set of von Neumann–Morgenstern utility functions, thereby allowing for incompleteness of preference relations. The proposed theory also yields new characterizations of the stochastic dominance orderings. 1.