Preference for Flexibility in a Savage Framework

The authors study preferences over Savage acts that map states to opportunity sets and satisfy the Savage axioms. Preferences over opportunity sets may exhibit a preference for flexibility due to an implicit uncertainty about future preferences reflecting anticipated unforeseen contingencies. The main result of the paper characterizes maximization of the expected indirect utility in terms of an 'indirect stochastic dominance' axiom that expresses a preference for 'more opportunities in expectation.' The key technical tool of the paper, conjugate Mobius inversion, allows an alternative representation using Choquet integration and yields a simple proof of D. Kreps's (1979) classic result.

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