Preference for flexibility in the absence of learning: the risk attitude effect
Economic Theory , Volume 40 - Issue 3 p. 405- 426
Individuals’ preferences over opportunity sets may display “preference for flexibility” which prescribes to gradually eliminate alternatives from a given set until a final choice is made. One rationale for this preference for flexibility is individuals’ incentive to postpone the final choice in order to better learn their underlying preferences over basic alternatives. In this paper we show that even in the absence of learning, preference for flexibility arises if individuals are risk-averse or, at least, are not very risk-seeking. Thus, individual’s attitude towards risk provides yet another rationale for preference for flexibility. One of our results is that in the absence of learning, risk-neutral as well as risk-averse individuals display the same, maximal preference for flexibility.
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|Organisation||Erasmus School of Economics|
Karamychev, V.A, & Ficco, S.S. (2009). Preference for flexibility in the absence of learning: the risk attitude effect. Economic Theory, 40(3), 405–426. doi:10.1007/s00199-008-0385-1