Induced Preferences, Dynamic Consistency and Dutch Books
AbstractThe authors assume that a decisionmaker has expected utility preferences over a large space which includes some variables not observable by the theorist. These will induce preferences over observable variables, which typically will not have the expected utility form. This paper focuses on implications for multiperiod decisions. The authors show that such preferences are not vulnerable to 'Dutch books.' In particular, they consider preferences arising from nonadditive subjective probabilities and show how they can arise as induced preferences. Copyright 1997 by The London School of Economics and Political Science
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 64 (1997)
Issue (Month): 255 (August)
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- Ludwig, Alexander & Zimper, Alexander, 2004.
"Investment Behavior under Ambiguity: The Case of Pessimistic Decision Makers,"
Sonderforschungsbereich 504 Publications
04-31, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Ludwig, Alexander & Zimper, Alexander, 2006. "Investment behavior under ambiguity: The case of pessimistic decision makers," Mathematical Social Sciences, Elsevier, vol. 52(2), pages 111-130, September.
- Alexander Ludwig & Alexander Zimper, 2004. "Investment Behavior under Ambiguity: The Case of Pessimistic Decision Makers," MEA discussion paper series 04060, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Cubitt, Robin P. & Sugden, Robert, 2001. "On Money Pumps," Games and Economic Behavior, Elsevier, vol. 37(1), pages 121-160, October.
- Spanjers, Willy, 2008. "Central banks and ambiguity," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 85-102.
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