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Characterizing lexicographic preferences
Institution:1. Department of Finance, Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden;2. Department of Economics, Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden;1. Turku School of Economics, University of Turku, Finland;2. Adam Smith Business School, University of Glasgow, United Kingdom;3. University of Helsinki and Helsinki Graduate School of Economics, Finland;1. Paris School of Economics, University Paris 1 Panthéon-Sorbonne, France;2. Santa Fe Institute, 1399 Hyde Park Road, Santa Fe, NM 87501, United States;1. INSIDE, University of Luxembourg, Luxembourg;2. Department of Quantitative Economics, School of Business and Economics, Maastricht University
Abstract:We characterize lexicographic preferences on product sets of finitely many coordinates. The main new axiom is a robustness property. It roughly requires this: Suppose x is preferred to y; many of its coordinates indicate that the former is better and only a few indicate the opposite. Then the decision maker is allowed a change of mind turning one coordinate in favor of x to an indifference: even if one less argument supports the preference, the fact that we started with many arguments in favor of x suggests that such a small change is not enough to give rise to the opposite preference.
Keywords:Lexicographic preferences  Lexicographic order  Characterization  Preferences
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