Spherical preferences (Q2211476)

This article puts forward the concept of preferences that satisfy orthogonal independence. It is a concept akin to the axiom of independence from irrelevant alternatives, which states that if alternative $x$ is preferred at least as alternative $y$, this preference ordering should not be altered if alternative $z$ was introduced in the comparisons. This paper studies a variant of this axiom called ``origin-independent orthogonal additivity''. It is a variant in which \begin{itemize} \item[(i)] a point of origin, an endowment or status-quo point, $w$, is introduced in the comparisons, \item[(ii)] the irrelevance of alternatives is captured by the orthogonality of vector (basket) $z$ to the vectors $x$ and $y$ entering a preference relationship according to which consumption basket $(w+x)$ is preferred at least as basket $(w+y)$, and \item[(iii)] the independence from irrelevant alternatives corresponds now to the proposition that this preference ordering will not change if baskets $(w+x+z)$ and $(w+y+z)$ are compared. \end{itemize} Since, three at least are the vectors that are related to some point of origin, preferences are at least three-dimensional, and the convexity of preferences of the two-dimensional space becomes now sphericality in a spherical space. There is certainly a lot of geometric intuition which is studied in full detail. The importance of this approach for the study of choice under uncertainty and social choice is emphasized, too. If $x$ and $y$ are uncertain states and $z$'s relation to them is identical, one might infer that $z$ is as good as hedge for $x$ as for $y$. Also, general spherical preferences over individual welfare vectors reflect a form of utilitarianism.