Abstract
This paper studies a class of binary relations on opportunity sets which we call opportunity relations (ORs). These are reflexive and transitive (pre-orders) and further satisfy a monotonicity and desirability condition. Associated with each OR is an essential element operator (Puppe, J Econ Theory 68:174–199, 1996). Our main results axiomatically characterise three important classes of ORs: those for which any opportunity set lies in the same indifference class as its set of essential elements—the essential ORs; those whose essential element operator is the extreme point operator for some closure space (Ando, Discrete Math 306:3181–3188, 2006)—the closed ORs; and those whose essential element operator is the extreme point operator for some abstract convex geometry (Edelman and Jamison, Geometriae Dedicata 19:247–270, 1985)—the convex ORs. Our characterisation of convex ORs generalises the analysis of Klemisch-Ahlert (Soc Choice Welf 10:189–207, 1993). Our results also provide complementary perspectives on the well-known characterisation of closure operators by Kreps (Econometrica 47:565–577, 1979), as well as the recent work of Danilov and Koshevoy (Order 26:69–94, 2009; Soc Choice Welf 45:51–69, 2015).
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Notes
See Kashiwabara et al. (2005).
We use the term “operator” in the sense of Danilov and Koshevoy (2009, Definition 1). That is, an operator is a mapping from \(2^{X\phantom {^T}}\) into itself.
We thank an anonymous referee for emphasising the value of this aspect of the paper, and for encouraging us to further clarify these links.
Klemisch-Ahlert (1993, p.196) provides three justifications for assuming that the value of a set is the same as that of its convex hull.
In particular, \(\succsim \) need not reflect actual or hypothetical choice behaviour. The individual need not anticipate facing a choice of opportunity sets (as opposed to a choice from an opportunity set). The binary relation \(\succsim \) may instead reflect her preferences over the opportunities with which the world chooses to present her—preferences over what she might be offered, rather than inclinations to choose. This distinction is potentially important for analysing conceptions of freedom.
Since M implies reflexivity we could replace “pre-order” in Definition 1 with “transitive binary relation”.
None of the following reasons is original to the present author, of course.
In other words, nothing would be lost by replacing D with the No Dummy condition of Danilov et al. (2015): \(\left\{ x\right\} \succ \emptyset \) for every \(x\in X\).
Nehring and Puppe (1999) say that x is “essential at \(A\diagdown x\)” if \(x\in e_{\succsim }\left( A\right) \). We follow Puppe’s (1996) terminology in the present paper. The related notion of an eligible element was introduced by van Hees (2010). However, his eligible element mapping \(e:2^{X}\rightarrow 2^{X}\) is treated as exogenous data, logically separate from the pre-order \(\succsim \), though the axioms in van Hees (2010) restrict the relationship between the two objects.
Property (iii) is a strengthening of the well-known Aizerman (or Outcast) condition on choice functions. In our context, this latter condition would require \(e_{\succsim }\left( B\right) \subseteq e_{\succsim }\left( A\right) \) whenever \(e_{\succsim }\left( A\right) \subseteq B\subseteq A\) (Moulin 1985).
The same property also appears, in a slightly weaker version, in Nehring and Puppe (1999), and in heavily disguised form in Nehring and Puppe (1998). Nehring and Puppe’s (1999) weaker version of CCN is called the Irrelevance of Inessential Elements (IIE) property. It allows CCN to be violated if \(x\sim y\sim \left\{ x,y\right\} \) or if \(A\diagdown \left\{ x,y\right\} =\emptyset \). Our Example 1 satisfies IIE. Note also that if \(\succsim \) is an OR satisfying CCN then \(x\sim y\sim \left\{ x,y\right\} \) implies \(x=y\) (otherwise CCN and D are in contradiction). Nehring and Puppe’s (1998) Strict Properness is essentially equivalent to CCN, though applied to so-called weak extended partial orders (WEPOs). Nehring and Puppe (1998) work with extended binary relations on X, which are subsets of \(2^{X}\times X\), rather than \(2^{X}\times 2^{X}\). The WEPOs are a particular class of extended binary relations. We may transform a binary relation \(\succsim \subseteq 2^{X}\times 2^{X}\) into an extended binary relation \(Q\subseteq 2^{X}\times X\) (and vice versa) by specifying that \(\left( A,x\right) \in Q\) iff \(A\succsim A\cup x\). Under this transformation, \(\succsim \) satisfies CCN iff Q satisfies Strict Properness.
Example 2 shows that EM is not necessary for (i). A necessary and sufficient condition is the following: for all \(A\subseteq X\) and all \(x,y\in X\),
$$\begin{aligned} A\sim A\cup x\sim A\cup y \Rightarrow A\sim A\cup \left\{ x,y\right\} \end{aligned}$$(5)To see the sufficiency of (5), note that the proof of Lemma 6(i) does not use the full strength of EM—only (5) is required. To see the necessity, suppose there exist \(A\subseteq X\) and \(x,y\in X\) such that \(A\sim A\cup x\sim A\cup y\) but \(A\cup \left\{ x,y\right\} \succ A\). Then \(A\cup \left\{ x,y\right\} \subseteq \sigma _{\succsim }\left( A\right) \), so M and transitivity give \(\sigma _{\succsim }\left( A\right) \succ A\).
However, Nehring and Puppe (1999) apply CC to binary relations contained within a restricted subset of \(2^{X}\times 2^{X}\). The Monotonicity condition on WEPOs (Nehring and Puppe 1998) can also be translated (via the rule of translation noted previously) into the following version of CC: \(A\subseteq B\) and \(A\succsim A\cup x\) imply \(B\succsim B\cup x\).
Suppose \(B\succ B\diagdown C\) and let \(C=\left\{ c_{1},\ldots ,c_{n}\right\} \). By M and transitivity there exists some \(k^{*}\in \left\{ 1,\ldots ,n-1\right\} \) such that
$$\begin{aligned} B\diagdown \left\{ c_{1},\ldots ,c_{k^{*}}\right\} \succ B\diagdown \left\{ c_{1},\ldots ,c_{k^{*}+1}\right\} \text {.} \end{aligned}$$Then, using M, transitivity and (6) we have:
$$\begin{aligned} A\succsim A\diagdown \left\{ c_{1},\ldots ,c_{k^{*}}\right\} \succ A\diagdown \left\{ c_{1},\ldots ,c_{k^{*}+1}\right\} \succsim A\diagdown C \end{aligned}$$and hence \(A\succ A\diagdown C\).
See also Nehring and Puppe (1999, footnote 3).
See also Danilov and Koshevoy (2009, Proposition 5).
It can be shown that the extreme point operator for any closure space on X is the essential element operator for some OR.
It also satisfies conditions (Cont) and (Ext) of DKS.
More precisely, Kreps studies weak orders on \(2^{X}\diagdown \left\{ \emptyset \right\} \) that satisfy M and (8). The latter, as we have observed, is equivalent to EM (given M and transitivity). If we use D to extend such a weak order to \(2^{X}\), we obtain a complete ClOR.
Lemma 1 in Puppe (1996) assumes that \(\succsim \) satisfies his Axiom F, but the proof that \(\succsim ^{*}\) is transitive (ibid., p.195) does not make use of Axiom F.
In a similar vein, Nehring and Puppe (1998, Theorem 4.1) apply Kreps (1979) to characterise the weak extended partial orders (WEPO’s) associated with ClOR’s. Given an OR, \(\succsim \), its associated WEPO consists of the pairs \(\left( A,x\right) \) such that \(A\succsim ^{*}x\), where \(\succsim ^{*}\) is the dominance relation for \(\succsim \). A yet-more-distant relative of the same basic result, but expressed in the idiom of modal logic, is presented in Gekker and Hees (2006).
Only Player 2’s payoffs are shown as Player 1’s payoffs are redundant to the analysis.
In fact, consider any finite, two-player game. Let n be the number of pure strategies available to Player 1 and let \(X\subseteq \mathbb {R}^{n}\) be the set of (Player 2) payoff vectors corresponding to each of Player 2’s pure strategies. It is not hard to show that the following defines an anti-exchange closure operator:
$$\begin{aligned} \kappa ^{*}\left( A\right) \ =\ \mathrm {co}( A+\mathbb {R}_{-}^{n}) \cap X\ =\ (\mathrm {co}( A) +\mathbb {R}_{-}^{n}) \cap X\text {.} \end{aligned}$$The fact that this decision-maker ranks sets by the cardinality of their closure may strike the reader as odd. Why should adding a strictly dominated strategy, for example, increase the value of the strategic opportunity set? While this may seem odd, it is nevertheless consistent with the well-known decoy (or attraction) effect (Clippel and Eliaz 2012). That said, any monotone pre-order satisfying \(A\sim \kappa ^{*}\left( A\right) \) for all \(A\subseteq X\) and \(A\succ B\) for all \(A,B\in 2^{X}\) with \(\kappa ^{*}\left( B\right) \subset \kappa ^{*}\left( A\right) \) will suit our purpose just as well.
In particular, property (CC2) of a closure operator ensures that M is satisfied.
To ensure a payoff greater than 3 when Player 1 chooses \(\beta \), Player 2 must place probability greater than \(\frac{1}{2}\) on a when mixing over a and d. But then the payoff to this mixture will be less than \(\frac{5}{2}\) when Player 1 chooses \(\alpha \).
With some effort, one can also perceive Nehring and Puppe’s (1998) Theorem 5.2 as an essentially equivalent result for WEPO’s.
Condition (17) is equivalent to the Lattice Equivalence (LE) condition in DKS, given the Union property and the finiteness of X.
To verify (C1), suppose \(\sigma \left( A\right) =A\) and \(\sigma \left( B\right) =B\). Two applications of (CC2) gives
$$\begin{aligned} \sigma \left( A\cap B\right) \subseteq \sigma \left( A\right) \cap \sigma \left( B\right) =A\cap B\text {.} \end{aligned}$$Since \(A\cap B\subseteq \sigma \left( A\cap B\right) \) by (CC1), we are done.
The second equality may be justified as follows. If \(x\in \sigma _{\mathcal {K}}\left( A\diagdown x\right) \) then (CC1) implies \(A\subseteq \sigma _{\mathcal {K}}\left( A\diagdown x\right) \) so (CC2) and (CC3) give
$$\begin{aligned} \sigma _{\mathcal {K}}\left( A\right) \subseteq \sigma _{\mathcal {K}}\left( \sigma _{\mathcal {K}}\left( A\diagdown x\right) \right) =\sigma _{\mathcal {K}}\left( A\diagdown x\right) \text {.} \end{aligned}$$Hence \(\sigma _{\mathcal {K}}\left( A\right) =\sigma _{\mathcal {K}}\left( A\diagdown x\right) \) by (CC2). Conversely, if \(\sigma _{\mathcal {K}}\left( A\right) =\sigma _{\mathcal {K}}\left( A\diagdown x\right) \) then \(A\subseteq \sigma _{\mathcal {K}}\left( A\diagdown x\right) \) by (CC2) and hence \(x\in \sigma _{\mathcal {K}}\left( A\diagdown x\right) \).
If \(x\in X\diagdown A\), then \(x\notin e_{\mathcal {K}}\left( A\cup x\right) \) clearly implies \(x\in \sigma _{\mathcal {K}}\left( A\right) \). Conversely, suppose \(x\in \sigma _{\mathcal {K}}\left( A\right) \). Then \(A\cup x\subseteq \sigma _{\mathcal {K}}\left( A\right) \) by (CC1), and hence, using (CC2) and (CC3):
$$\begin{aligned} \sigma _{\mathcal {K}}\left( A\cup x\right) \subseteq \sigma _{\mathcal {K}}(\sigma _{\mathcal {K}}\left( A\right) ) =\sigma _{\mathcal {K}}\left( A\right) \text {.} \end{aligned}$$
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My thanks to the Editor and two anonymous referees for thoughtful comments on an earlier draft. All remaining shortcomings are entirely the author’s responsibility.
Appendices
Appendices
The following Appendices review some basic facts about closure spaces and abstract convex geometries. Further details, including omitted proofs, can be found in Edelman and Jamison (1985).
A Closure spaces
Given a finite set X, a closure space on X is a collection \(\mathcal {K}\) of subsets of X satisfying, for all \(A,B\subseteq X\):
-
(C0)
\(\emptyset ,X\in \mathcal {K}\),
-
(C1)
If \(\left\{ A,B\right\} \subseteq \mathcal {K}\), then \(A\cap B\in \mathcal {K}\).
We take X as given from now on and omit the qualifier “on X” when discussing closure spaces.
A closure space is an abstract generalisation of the notion of closing a set with respect to some underlying operation, such as forming linear combinations. The elements of \(\mathcal {K}\) are interpreted as the subsets of X which are closed with respect to the underlying operation. They are therefore called the closed subsets of X.
Given a closure space \(\mathcal {K}\) and a set \(A\subseteq X\), we define \(\sigma _{\mathcal {K}}\left( A\right) \) to be the smallest element of \(\mathcal {K}\) containing A. This is well-defined by (C1):
We say that \(\sigma _{\mathcal {K}}\left( A\right) \) is the closure of A. It is easy to see that \(\mathcal {K}\) and \(\sigma _{\mathcal {K}}\) contain the same information: given \(\sigma _{\mathcal {K}}\) we may recover \(\mathcal {K}\) by the rule: \(A\in \mathcal {K}\) iff \(\sigma _{\mathcal {K}}\left( A\right) =A\).
More generally, we call \(\sigma :2^{X}\rightarrow 2^{X}\) a closure operator if it satisfies, for all \(A,B\subseteq X\):
-
(CC0)
\(\sigma \left( \emptyset \right) =\emptyset \),
-
(CC1)
\(A\subseteq \sigma (A)\),
-
(CC2)
\(A\subseteq B\) implies \(\sigma (A)\subseteq \sigma (B)\),
-
(CC3)
\(\sigma (\sigma (A))=\sigma (A)\).
If \(\sigma \) is a closure operator, then it is easily shown that the collection
is a closure space;Footnote 35 and given any closure space \(\mathcal {K}\), it is clear that \(\sigma _{\mathcal {K}}\) satisfies (CC0)–(CC3). Indeed:
Theorem A.1
Given a closure space \(\mathcal {K}\), the operator \(\sigma _{\mathcal {K}}\) is a closure operator and \(\mathcal {K}=\mathcal {K}_{\sigma _{\mathcal {K}}}\).
Proof
We already observed that \(\sigma _{\mathcal {K}}\) is a closure operator. If \(A\in \mathcal {K}\), then \(\sigma _{\mathcal {K}}\left( A\right) =A\). Conversely, if \(\sigma _{\mathcal {K}}\left( A\right) =A \) then A is the intersection of sets in \(\mathcal {K}\) and hence \(A\in \mathcal {K}\). \(\square \)
Given a closure space \(\mathcal {K}\), we may also define an operator \(e_{\mathcal {K}}:2^{X}\rightarrow 2^{X}\) as follows:Footnote 36
The elements of \(e_{\mathcal {K}}\left( A\right) \) are called the extreme points of A.
The closure operator \(\sigma _{\mathcal {K}}\) can be recovered from \(e_{\mathcal {K}}\) as follows:Footnote 37
Thus, \(\mathcal {K}\), \(\sigma _{\mathcal {K}}\) and \(e_{\mathcal {K}}\) all encode the same information.
We should also mention the recent work of Danilov and Koshevoy (2009), who study pairs of operators \(\left( \sigma ,e\right) \) satisfying \(e\left( A\right) \subseteq A\subseteq \sigma \left( A\right) \) for any \(A\in 2^{X}\) and related by the analogue of condition (18):
Danilov and Koshevoy do not assume that these operators are derived from an underlying closure space. By directly investigating the duality (20), they are able to map properties of \(\sigma \) into the corresponding properties of e and vice versa, obtaining a novel characterisation of closure operators (Danilov and Koshevoy 2009, Lemma 2) and a new derivation of Ando’s (2006) axiomatisation of the extreme point operators associated with closure spaces (Danilov and Koshevoy 2009, Proposition 5). We comment on a connection between their Lemma 2 and our characterisation of closed opportunity relations in Sect. 4.1.
B Abstract convex geometries
An abstract convex geometry (ACG) is a closure space for which the closure operation has the (algebraic) flavour of forming a convex hull. If \(\mathcal {K}\) is an ACG, then the elements of \(\mathcal {K}\) are usually referred to as the convex subsets of X, rather than the closed sets.
Formally, an ACG is a closure space \(\mathcal {K}\) that satisfies:
-
(C2)
If \(A\in \mathcal {K}\diagdown \left\{ X\right\} \), then \(A\cup x\in \mathcal {K}\) for some \(x\in X\diagdown A\).
The sense in which (C2) captures the idea of convexity is clarified by the following important result:
Theorem B.1
If \(\mathcal {K}\) is an ACG, then the associated closure operator \(\sigma =\sigma _{\mathcal {K}}\) satisfies:
-
(CC4)
For any \(A\subseteq X\) with \(\sigma \left( A\right) =A\) and any \(x,y\in X\diagdown A\) with \(x\ne y\), if \(y\in \sigma (A\cup x)\), then \(x\notin \sigma (A\cup y)\).
Conversely, if \(\sigma \) is a closure operator satisfying (CC4), then \(\mathcal {K}_{\sigma }\) satisfies (C2).
Condition (CC4) is called the anti-exchange property.
Edelman and Jamison (1985) provide a range of other conditions on a closure space that are equivalent to the anti-exchange property of its associated closure operator. For our purposes, the most important of these is the following generalisation of the Minkowski–Krein–Milman property:
Theorem B.2
(Edelman and Jamison, Theorem 2.1) A closure space \(\mathcal {K}\) is an ACG iff \(\sigma _{\mathcal {K}}\left( A\right) =\sigma _{\mathcal {K}}\left( e_{\mathcal {K}}\left( A\right) \right) \) for any \(A\subseteq X\).
Thus, the extreme points of A “carry” the convex hull (closure) of A.
Recall that Ando (2006) and Danilov and Koshevoy (2009) give an axiomatic characterisation of the class of extreme point operators associated with closure spaces. Given an operator within this class, Danilov and Koshevoy (2009, Proposition 5, Corollary 3) provide necessary and sufficient conditions for it to be the extreme point operator for some ACG. We discuss a connection between their result and our characterisation of convex opportunity relations in Sect. 5.1.
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Ryan, M. Essentiality and convexity in the ranking of opportunity sets. Soc Choice Welf 47, 853–877 (2016). https://doi.org/10.1007/s00355-016-0994-8
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DOI: https://doi.org/10.1007/s00355-016-0994-8