Flexibility of choice versus reduction of ambiguity (Q2426967)

A problem of welfare-maximizing social planning in which the decision-maker chooses his social plannes under specific conditions, is analyzed. The considered conditions include: incomplete knowledge of preferences (i.e., the preference relation is incomplete), strong ambiguity aversion (i.e., the preferences are targeted to small opportunity sets), and the preference for flexibility (i.e., the resulting opportunity set contains also the ''second best'' solutions). The paper is devoted to the analysis of such model and to the explanation, how a welfare-maximizing social planner can, by means of it, optimally restrict the opportunity set.