Preferences Under Ignorance

25 Pages Posted: 15 Sep 2015

See all articles by Olivier Gossner

Olivier Gossner

Ecole Polytechnique, Paris; London School of Economics & Political Science (LSE)

Christoph Kuzmics

University of Graz - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 15, 2015

Abstract

A decision maker (DM) makes choices from different sets of alternatives. The DM is initially fully ignorant of the payoff associated to each alternative, and learns these payoffs only after a large number of choices have been made. We show that, in the presence of an outside option once payoffs are learned, the optimal choice rule from sets of alternatives is one that is as if the DM had strict preferences over all alternatives. Under this model, the DM has preferences for preferences while being ignorant of what preferences are "right".

Keywords: consistency, rationality, weak axiom of revealed preferences, strict preference

JEL Classification: C73, D01, D11

Suggested Citation

Gossner, Olivier and Kuzmics, Christoph, Preferences Under Ignorance (September 15, 2015). Center for Mathematical Economics Working Paper No. 546. Available at SSRN: https://ssrn.com/abstract=2660719 or http://dx.doi.org/10.2139/ssrn.2660719

Olivier Gossner

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Christoph Kuzmics (Contact Author)

University of Graz - Department of Economics ( email )

Universitaetsstrasse 15
RESOWI - F4
Graz, 8010
Austria

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