Dynamic preference for flexibility

• Autores: R. Vijay Krishna, Philipp Sadowski
• Localización: Econométrica: Journal of the Econometric Society, ISSN 0012-9682, Vol. 82, Nº 2, 2014, págs. 655-703
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • We consider a decision maker who faces dynamic decision situations that involve intertemporal trade-offs, as in consumption�savings problems, and who experiences taste shocks that are transient contingent on the state of the world. We axiomatize a recursive representation of choice over state contingent infinite horizon consumption problems, where uncertainty about consumption utilities depends on the observable state and the state follows a subjective Markov process. The parameters of the representation are the subjective process that governs the evolution of beliefs over consumption utilities and the discount factor; they are uniquely identified from behavior. We characterize a natural notion of greater preference for flexibility in terms of a dilation of beliefs. An important special case of our representation is a recursive version of the Anscombe�Aumann model with parameters that include a subjective Markov process over states and state-dependent utilities, all of which are uniquely identified.