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Dynamic Consistency and Ambiguity : A Reappraisal
- Source :
- Games and Economic Behavior, Games and Economic Behavior, Elsevier, 2020, ⟨10.1016/j.geb.2019.12.012⟩
- Publication Year :
- 2013
- Publisher :
- HAL CCSD, 2013.
-
Abstract
- It is commonly argued that dynamic consistency, consequentialism and non-expected utility are incompatible. The first aim of this paper is to rebut such arguments, by targeting the implicit assumption that the relevant contingencies correspond to objective resolutions of uncertainty (that is, events in a state space). These are not necessarily the same as the contingencies that the decision maker envisages, and we argue that any reasonable notion of dynamic consistency involves the latter, rather than the former, sort of contingency. We formulate such a version of dynamic consistency and show it to be compatible with consequentialism and non-expected utility. We then analyze the economic consequences of this new perspective. On the one hand, it provides a principled justification for restrictions on non-expected utility models (such as that proposed by Epstein and Schneider (2003)) in applications to dynamic choice problems. On the other hand, it provides a new analysis of the issue of attitude to information; contra standard arguments, the value of information under non-expected utility is non-negative as long as the information offered does not compromise information that the decision maker had otherwise expected to receive. Finally, we give a representation theorem for the contingencies the decision maker envisages, in the case where he uses the maxmin expected utility rule.
- Subjects :
- Dynamic consistency
Ambiguity
Economics and Econometrics
jel:D81
Opportunity cost
Computer science
Epistemic Contingency
media_common.quotation_subject
jel:D83
Envisaged Contingency
Decision under Uncertainty
Dynamic Consistency
Dynamic Choice
Value of Information
JEL: D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D83 - Search • Learning • Information and Knowledge • Communication • Belief • Unawareness
Value of information
Microeconomics
0502 economics and business
Credibility
050207 economics
media_common
05 social sciences
[SHS.PHIL]Humanities and Social Sciences/Philosophy
JEL: D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D81 - Criteria for Decision-Making under Risk and Uncertainty
Dynamic choice
[SHS.ECO]Humanities and Social Sciences/Economics and Finance
16. Peace & justice
Decision maker
ecision under Uncertainty
Normative
[SHS.GESTION]Humanities and Social Sciences/Business administration
050206 economic theory
[SHS.GESTION] Humanities and Social Sciences/Business administration
Finance
Subjects
Details
- Language :
- English
- ISSN :
- 08998256 and 10902473
- Database :
- OpenAIRE
- Journal :
- Games and Economic Behavior, Games and Economic Behavior, Elsevier, 2020, ⟨10.1016/j.geb.2019.12.012⟩
- Accession number :
- edsair.doi.dedup.....75b0692923fcc148b42c3e2b88d16dce