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The aversion to the sequential resolution of uncertainty

Palacios-Huerta, Ignacio (1999) The aversion to the sequential resolution of uncertainty. Journal of Risk and Uncertainty, 18 (3). pp. 249-269. ISSN 0895-5646

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Abstract

This paper sets forth and offers an explanation for preferences for the form of the timing of resolution of uncertainty; namely for uncertainty to be resolved all at one time rather than sequentially. The explanation is based on a weakening of the independence axiom, in particular on the notion of disappointment aversion developed in Gul's (1991) axiomatic model of preferences. Implications of this aversion are discussed for issues in finance, intertemporal decision making under uncertainty, high stakes risky situations and consumer self-regulation. The analysis encourages a formulation of preferences over all attributes of interest to the decision maker, including psychological satisfaction.

Item Type: Article
Official URL: http://www.springerlink.com/content/100299/
Additional Information: © 1999 Kluwer Academic Publishers
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 08 Jan 2010 15:25
URL: http://eprints.lse.ac.uk/26568/

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