Twofold Multiprior Preferences and Failures of Contingent Reasoning
Theoretical Economics
2022-01-14 v3
Abstract
We propose a model of incomplete \textit{twofold multiprior preferences}, in which an act is ranked above an act only when provides higher utility in a worst-case scenario than what provides in a best-case scenario. The model explains failures of contingent reasoning, captured through a weakening of the state-by-state monotonicity (or dominance) axiom. Our model gives rise to rich comparative statics results, as well as extension exercises, and connections to choice theory. We present an application to second-price auctions.
Keywords
Cite
@article{arxiv.2012.14557,
title = {Twofold Multiprior Preferences and Failures of Contingent Reasoning},
author = {Federico Echenique and Masaki Miyashita and Yuta Nakamura and Luciano Pomatto and Jamie Vinson},
journal= {arXiv preprint arXiv:2012.14557},
year = {2022}
}