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Preference for Verifiability

Hendrik Rommeswinkel

Abstract

Decision makers sometimes cannot observe the consequences of their actions ex-post. This paper axiomatically characterizes a decision model in which the decision maker cares about verifying that a good consequence has been achieved. Preferences over acts identify a set of events the decision maker expects to verify. Decision makers choose acts maximizing, in expectation over verifiable events, the worst-case utility consistent with each event. A dual model captures decision makers who instead seek to obscure poor outcomes from verification. As an application, firms choosing carbon-reduction technologies may prefer less efficient but more verifiable technologies to prove emission reductions to stakeholders.

Preference for Verifiability

Abstract

Decision makers sometimes cannot observe the consequences of their actions ex-post. This paper axiomatically characterizes a decision model in which the decision maker cares about verifying that a good consequence has been achieved. Preferences over acts identify a set of events the decision maker expects to verify. Decision makers choose acts maximizing, in expectation over verifiable events, the worst-case utility consistent with each event. A dual model captures decision makers who instead seek to obscure poor outcomes from verification. As an application, firms choosing carbon-reduction technologies may prefer less efficient but more verifiable technologies to prove emission reductions to stakeholders.

Paper Structure

This paper contains 19 sections, 19 theorems, 20 equations, 1 figure.

Table of Contents

  1. Introduction
  2. Introductory Example
  3. Notation
  4. Decision Models
  5. Axioms
  6. Characterization of Expected Certification Utility
  7. Characterization of Expected Obfuscation Utility
  8. Model Properties
  9. Relation to Literature
  10. Discussion
  11. Proof of Corollary \ref{['coro:ceu']}
  12. Proof of Theorem \ref{['thm:verification']}
  13. Proof of Corollary \ref{['coro:ambiguityattitude']}
  14. Proof of Proposition \ref{['prop:uniqueness']}
  15. Proof of Theorem \ref{['thm:obfuscation']}
  16. ...and 4 more sections

Key Result

Corollary 1

The following statements are equivalent:

Figures (1)

  • Figure 1: Carbon Reduction Programs

Theorems & Definitions (53)

  • Definition 1: Expected Certification Utility
  • proof : Example
  • Definition 2: Expected Obfuscation Utility
  • proof : Example
  • Definition 3: Preference Average
  • proof : Example
  • Definition 4: Comonotonic Acts
  • Corollary 1: Expected Verifiability Representation
  • Definition 5: Sensitive event
  • Definition 6: Reactive event
  • ...and 43 more