Two Projects in Decision and Preference Theory

This proposal plans to extend the theory of how people make economic decisions in two ways. The first project focuses on the preference for variety, which is usually ignored. We plan to study this preference by investigating the way in which preferences depend on the underlying characteristic of the goods. We will devise a choice structure from which characteristics are derived as subjective elements in the representation of individual choices. This will allow empirical testing and estimation of the theory. We also plan to identify the class of preferences over goods that can be generated by preferences over characteristics that satisfy conditions like concavity. Such class is larger than the set of neoclassical utilities, but still a restricted set.

The second project further develops the theory of preference for flexibility and commitment, and will model unforeseen actions. In this way, we will try to explain things such as multiple temptations, compromise and guilt. The fact that some actions are unforeseen is a natural extension of the dual idea that events are unforeseen. This second project will provide a complete analysis of a crucial and so far relatively unexplored source of uncertainty.