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Hidden actions and preferences for timing of resolution of uncertainty

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  • ,

    (Department of Economics, University of California-Berkeley)

  • ,

    (Department of Economics, Duke University)

Abstract
We study preferences for timing of resolution of objective uncertainty in a menu-choice model with two stages of information arrival. We characterize a general class of utility representations called hidden action representations, which interpret an intrinsic preference for timing of resolution of uncertainty as if an unobservable action is taken between the resolution of the two periods of information arrival. These representations permit a richer class of preferences for timing than was possible in the model of Kreps and Porteus (1978) by incorporating a preference for flexibility. Our model contains several special cases where this hidden action can be given a novel economic interpretation.

Suggested Citation

  • , & ,, 2015. "Hidden actions and preferences for timing of resolution of uncertainty," Theoretical Economics, Econometric Society, vol. 10(2), May.
    • Handle: RePEc:the:publsh:1340
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    Cited by:

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    2. Pennesi, Daniele, 2015. "Costly information acquisition and the temporal resolution of uncertainty," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 115-122.
    3. Qiu, Wenfeng & Ahn, David S., 2021. "Uncertainty from the small to the large," Journal of Economic Theory, Elsevier, vol. 198(C).
    4. Todd Sarver, 2012. "Optimal Reference Points and Anticipation," Discussion Papers 1566, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Sadowski, Philipp & Sarver, Todd, 2024. "Adaptive preferences: An evolutionary model of non-expected utility and ambiguity aversion," Journal of Economic Theory, Elsevier, vol. 218(C).
    6. Nobuo Koida, 2018. "Anticipated stochastic choice," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 545-574, May.
    7. Mihm, Maximilian & Ozbek, Kemal, 2018. "Mood-driven choices and self-regulation," Journal of Economic Theory, Elsevier, vol. 176(C), pages 727-760.

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    More about this item

    Keywords

    Temporal preferences; preference for flexibility; hidden action; subjective uncertainty;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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