Preference for flexibility in infinite horizon problems (Q1852655)

Flexibility is the luxury of a second thought, the ability of revising one's previous plans, or even leaving them vague, until the time to choose comes. The author considers the extension of the classical problem of preference for flexibility to many periods. Preferences are defined over sets of infinite paths of choices. The main result provides a set of axioms on preferences that yield an additive representation over a subjective state space. This space is the set of preferences over choice today and feasible set tomorrow. The main new axiom, stochastic dominance, is a stronger form of the assumption of monotonicity.