Supplement to “ Preference for Flexibility and Random Choice ”

Preference for Flexibility and Random Choice

Dynamic Preference for Flexibility Unobservable Persistent Taste Shocks

In this supplement to Krishna and Sadowski [2013], we construct a recursive representation of choice over infinite horizon consumption problems where the decision maker’s utilities follow a subjective Markov process. The parameters of the representations, which are the (evolution of) beliefs over consumption utilities, and the discount factor, are uniquely identified from behavior.

Subjective random discounting and intertemporal choice

This paper provides an axiomatic foundation for a particular type of preference shock model, called the random discounting representation, where a decision maker believes that her discount factors change randomly over time. For this purpose, we formulate an infinite horizon extension of Dekel, Lipman, and Rustichini (2001), and identify the behavior that reduces all the subjective uncertainties...

On Calibration and Application of Logit-Based Stochastic Traffic Assignment Models

There is a growing recognition that discrete choice models are capable of providing a more realistic picture of route choice behavior. In particular, influential factors other than travel time that are found to affect the choice of route trigger the application of random utility models in the route choice literature. This paper focuses on path-based, logit-type stochastic route choice models, i...

Flexibility and the Demand for Risky Assets

To a decisionmaker facing a choice over a set of risky prospects the issue of ‘flexibility’, i.e., the ability to postpone other decisions until after the uncertainty is resolved, is a crucial one. Tisdell (1963) for example, has shown that the well known ‘preference’ of a risk neutral firm for random over constant prices (with the same mean) reduces to indifference when it is assumed that the ...