Confidence as a Source of Deferral

64 Pages Posted: 11 Oct 2014 Last revised: 11 Apr 2015

See all articles by Brian Hill

Brian Hill

HEC Paris - Economics & Decision Sciences; CNRS

Date Written: April 10, 2015

Abstract

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

Hill, Brian, Confidence as a Source of Deferral (April 10, 2015). HEC Paris Research Paper No. ECO/SCD-2014-1060. Available at SSRN: https://ssrn.com/abstract=2508192 or http://dx.doi.org/10.2139/ssrn.2508192

Brian Hill (Contact Author)

HEC Paris - Economics & Decision Sciences ( email )

Paris
France

CNRS ( email )

3, rue Michel-Ange
Paris, 75794
France

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