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5 - Safety Bias

from Part I - Trade-Offs and Rationality

Published online by Cambridge University Press:  02 January 2025

Michael Mandler
Affiliation:
Royal Holloway, University of London
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Summary

An agent unable to decide how to trade-off rival goods can turn to a family of welfare functions and choose the option that guarantees the greatest welfare level. The agent will then display a bias in favor of the ‘safe’ options to which all of the welfare functions impute the same level of welfare. When the rival goods are ordinary items of consumption, the safety-biased preferences that result will exhibit complementarities. When the rival goods are commodities delivered at different states of nature, safety-biased preferences will generate the maxmin model of choice under uncertainty. In any setting, the agent’s sets of preferred options will display kinks at the safe options but not at other options. Such agents will therefore tend to consume at just the points where slight changes in consumption have a large effect on agents’ marginal valuations of goods and hence on prices.

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Chapter
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Economics without Preferences
Microeconomics and Policymaking Beyond the Maximizing Individual
, pp. 86 - 100
Publisher: Cambridge University Press
Print publication year: 2025

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  • Safety Bias
  • Michael Mandler, Royal Holloway, University of London
  • Book: Economics without Preferences
  • Online publication: 02 January 2025
  • Chapter DOI: https://doi.org/10.1017/9781009340731.006
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  • Safety Bias
  • Michael Mandler, Royal Holloway, University of London
  • Book: Economics without Preferences
  • Online publication: 02 January 2025
  • Chapter DOI: https://doi.org/10.1017/9781009340731.006
Available formats
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Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Safety Bias
  • Michael Mandler, Royal Holloway, University of London
  • Book: Economics without Preferences
  • Online publication: 02 January 2025
  • Chapter DOI: https://doi.org/10.1017/9781009340731.006
Available formats
×