Research

Putting Context into Preference Aggregation (with Karl Schlag)

The axioms underlying Arrow's impossibility theorem are very restrictive in terms of what can be used when aggregating preferences. Social preferences may not depend on the menu nor on preferences over alternatives outside the menu. But context matters. So, we weaken these restrictions to allow for context to be included. The context, as we define, describes which alternatives in the menu and which preferences over alternatives outside the menu matter. We obtain unique representations. These are discussed in examples involving markets, the intertemporal well-being of an individual, and bargaining.

Rational Bargaining: Characterization and Implementation

The von Neumann-Morgenstern axioms are uncontroversial desiderata for individual decision-making. We say that a bargaining solution is rational if it can be interpreted as the most preferred alternatives under these axioms. Yet, neither the Nash nor the Kalai-Smorodinsky bargaining solution is rational in this sense. We formalize two consequences of rationality, namely that one can neither be strictly better off nor strictly worse off from randomizing over different actions. These two axioms, together with other standard axioms, characterize the relative utilitarian bargaining solution. We then implement this bargaining solution in sub-game perfect equilibrium.

Consumer Search in Service Markets

In many service markets, a firm's marginal cost of providing service depends on consumer-specific characteristics. Additionally, expert firms can often better judge consumers' relevant characteristics than the consumers themselves. This paper explores the consequences of this informational asymmetry on price transparency. Firms can choose whether to display a single price for all consumers or to make individualized offers after learning the consumer's characteristics. We find that an equilibrium can exist in which no firm displays a price, resulting in monopoly prices and profits. Remarkably, this equilibrium can be better for consumers compared to pricing at the expected marginal cost.

Axiomatizing Preferences over Varying Time Horizons

We consider the preferences of a decision maker that lives for finitely many periods and hence faces a diminishing number of future periods as time passes. We identify axioms that connect preferences across horizons and lead to exponential and quasi hyperbolic discounting. Existing axiomatizations for an infinite horizon ignore the problem of changing horizons and are not applicable. Existing axiomatizations for a finite horizon do not ensure identical discounting across preference relations and are therefore insufficient. We also extend the environment to allow for an uncertain time horizon.