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Dynamically stable preferences

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  • Gumen, Anna
  • Savochkin, Andrei

Abstract

In the framework of dynamic choice under uncertainty, we define dynamic stability as a combination of two assumptions prevalent in the literature: dynamic consistency and the requirement that updated preferences have the same “structure” as ex ante ones. Dynamic stability also turns out to be a defining characteristic of the multiplier preferences of Hansen and Sargent (2001) [24] within the scope of variational preferences. Generally, for any class of invariant preferences, dynamic stability is shown to be connected to another independent property — consequentialism.

Suggested Citation

  • Gumen, Anna & Savochkin, Andrei, 2013. "Dynamically stable preferences," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1487-1508.
  • Handle: RePEc:eee:jetheo:v:148:y:2013:i:4:p:1487-1508
    DOI: 10.1016/j.jet.2013.04.018
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    References listed on IDEAS

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    Cited by:

    1. Andrei Savochkin & Alexander Shklyaev & Alexey Galatenko, 2022. "Dynamic Consistency and Rectangularity for the Smooth Ambiguity Model," Working Papers w0288, New Economic School (NES).
    2. Faro, José Heleno & Lefort, Jean-Philippe, 2019. "Dynamic objective and subjective rationality," Theoretical Economics, Econometric Society, vol. 14(1), January.
    3. Takashi Hayashi, 2016. "Consistent updating of social welfare functions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(3), pages 569-608, March.
    4. Daniele Pennesi, 2013. "Asset Prices in an Ambiguous Economy," Carlo Alberto Notebooks 315, Collegio Carlo Alberto.
    5. Longjian Li, 2022. "Ambiguous Cheap Talk," Papers 2209.08494, arXiv.org.

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    More about this item

    Keywords

    Dynamic consistency; Dynamic stability; Ambiguity; Invariance; Consequentialism; Multiplier preferences;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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