2010•Open Research (University of Surrey)Requires access
Incomplete Information and Lexicographic Choices: Some Continuity Results
Debora Di Caprio, Francisco J. Santos‐Arteaga, Stephen Watson
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Abstract
We construct a model where choices are defined by preference relations induced by incomplete information on a set of commodities, whose elements are given by finite dimensional vectors of characteristics. Imposing natural conditions on the choice set allows for preferences to be continuously and additively representable on it. Lexicographic choices are shown to follow from continuous preferences and to be representable by continuous utility functions that are both additive and lexicographic. Since the lexicographic quality of choice derives from the incomplete information assumption, lexicographic preferences should not be excluded from economic equilibrium theory unless choices are made under perfect information.