Single Review on past events

Hendrik Rommeswinkel (Research Visit Fellow / Economics, Waseda Institute for Advanced Study, Japan) gave a talk entitled "Preference for Verifiability".

Abstract:

Decision makers may face situations in which they cannot observe the outcomes that result from their actions. In such decisions, motivations other than the expected utility of good outcomes may play a role. The present paper axiomatically characterizes a decision model in which the decision maker cares about whether it can be ex post verified that a good outcome has been achieved. Preferences over acts uniquely characterize a set of events that the decision maker expects to be able to verify in case they occur. The decision maker maximizes the ex ante expected utility across verifiable events of the ex post worst possible outcome that may have occurred on a verified event.
For example, a firm choosing between different carbon emission reduction technologies may find some technologies to leave ex post more uncertainty about the level of emission reduction than other technologies. The firm may care about proving to its stakeholders that a certain amount of carbon reduction has been achieved and may employ scientific studies to do so. It may choose in expectation less efficient technologies if the achieved carbon reduction is better verifiable using the available scientific studies.