Confidence as a Source of Deferral
64 Pages Posted: 11 Oct 2014 Last revised: 11 Apr 2015
Date Written: April 10, 2015
One apparent reason for deferring a decision – abstaining from choosing, leaving the decision open to be taken by someone else, one’s later self, or nature – is for lack of sufficient confidence in the relevant beliefs. This paper develops an axiomatic theory of decision in situations where a costly deferral option is available that captures this source of deferral. Drawing on it, a preliminary behavioural comparison with other accounts of deferral, such as those based on information asymmetry, is undertaken, and a simple multi-factor model of deferral – involving both confidence and information considerations – is formulated. The model suggests that incorporating confidence can account for cases of deferral that traditional accounts have trouble explaining.
Keywords: Confidence, multiple priors, deferral, delegation, information acquisition, value of information, incomplete preferences
JEL Classification: D81, D80, D83
Suggested Citation: Suggested Citation