Inter-temporal Preference for Flexibility and Risky Choice∗

We derive an inter-temporal theory, in the spirit of Kreps and Porteus (1978), of changing tastes and unforeseen contingencies from normative primitives by weakening the completeness axiom of von Neumann and Morgenstern. Our agent can only partially order future decisions, yet desires inter-temporal consistency. Our formulation contrasts with existing literature in several ways: (i) the theory is inherently inter-temporal; (ii) a time consistency condition and therefore the normative connection between ex-ante and ex-post choice forces a ‘utility for flexibility’; (iii) we deduce conditions under which a subjective state space for unforeseen contingencies is topologically unique and derive its existence from preference primitives as opposed to the representation; Finally, our theory reduces to standard recursive utility when the agent can completely order future decisions.