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Published June 2022 | Submitted + Supplemental Material
Journal Article Open

Twofold multiprior preferences and failures of contingent reasoning

Abstract

We propose a model of incomplete twofold multiprior preferences, in which an act f is ranked above an act g only when f provides higher utility in a worst-case scenario than what g 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.

Additional Information

© 2022 Elsevier Inc. Received 6 February 2021, Revised 12 January 2022, Accepted 19 March 2022, Available online 30 March 2022, Version of Record 7 April 2022. This paper subsumes the working paper "An Axiomatic Approach to Failures in Contingent Reasoning" by Masaki Miyashita and Yuta Nakamura, and the working paper "Twofold Conservatism in Choice under Uncertainty" by Federico Echenique, Luciano Pomatto, and Jamie Vinson. We are grateful to the editor and the referees for their helpful comments and suggestions. Echenique thanks the National Science Foundation for financial support (Grants SES-1558757 and CNS-518941).

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Submitted - 2012.14557.pdf

Supplemental Material - 1-s2.0-S0022053122000382-mmc1.pdf

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August 22, 2023
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