Justifiable Preferences

22 Pages Posted: 14 May 2009 Last revised: 10 Aug 2009

See all articles by Ehud Lehrer

Ehud Lehrer

Tel Aviv University - School of Mathematical Sciences

Roee Teper

Tel Aviv University

Date Written: June 19, 2009

Abstract

Justifiability is a name for a variety of well-documented behavioral phenomena that violate rational choices. For instance, preferences and choices frequently depend on payoff-irrelevant factors, and not only on the collection of alternatives. Motivated by these findings we present a generalized ambiguity model that involves a collection of multiple priors. We characterize Knightian (Bewley (2002)) preferences that accommodate justifiability. An act f is (weakly) preferred to act g if, according to at least one set of multiple priors (which is derived by a payoff-irrelevant factor) in the collection, f is unanimously preferred to g. These kind of preferences are called "justifiable preferences". In addition, a particular model of justifiable preferences that are generated by partially-specified probabilities is axiomatized.

Keywords: Justifiable preferences, multiple priors, multiple multiple priors, partially specified probabilities

JEL Classification: D81, D83

Suggested Citation

Lehrer, Ehud and Teper, Roee, Justifiable Preferences (June 19, 2009). Available at SSRN: https://ssrn.com/abstract=1404614 or http://dx.doi.org/10.2139/ssrn.1404614

Ehud Lehrer

Tel Aviv University - School of Mathematical Sciences ( email )

Tel Aviv 69978
Israel

Roee Teper (Contact Author)

Tel Aviv University ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel

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