Axiomatic analysis of choosing the second best

Abstract

The dominant theme in decision theory has been the one where an agent chooses what is perceived to be the best outcome out of a (finite) set of outcomes. This has been the model that economic theory has traditionally favored. In a paper by Baigent and Gaertner (1996) we find a departure from this theme. It is argued there that if there is a unique best outcome then often one may forgo one s claim to it out of politeness. A similar consideration is that of altruism which manifests itself in similar behavior. However, can there be no other type of consideration which prompts one to judiciously avoid the best? In this paper we provide two axiomatic characterizations of the decision rule which invariably selects the second best alternative. Unlike Baigent and Gaertner (1996) we restrict ourselves to the situation where no two alternatives share the same rank.