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Adequate Moods for non-EU Decision Making in a Sequential Framework

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  • Nathalie Etchart-Vincent

    ()
    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Nationale du Génie Rural des Eaux et Forêts)

Abstract

In a dynamic (sequential) framework, departures from the independence axiom (IND) are reputed to induce violations of dynamic consistency (DC), which may in turn have undesirable normative consequences. This result thus questions the normative acceptability of non expected-utility (non-EU) models, which precisely relax IND. This paper pursues a twofold objective. The main one is to discuss the normative conclusion: usual arguments linking violations of DC to departures from IND are shown to be actually based on specific (but usually remaining implicit) assumptions which may rightfully be released, so that it is actually possible for a non-EU maximizer to be dynamically consistent and thus avoid normative difficulties. The second objective is to introduce a kind of 'reality principle' (through two other evaluation criteria) in order to mitigate the normative requirement when examining adequate moods for non-EU decision making.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00004830.

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Date of creation: 2002
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Publication status: Published, Theory and Decision, 2002, 52, 1-28
Handle: RePEc:hal:journl:halshs-00004830

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Keywords: Sequential Decisions; Decision Trees; Dynamic Consistency; Non Expected Utility; Myopia; Money Pump; Consequentialism; Sophisticated Behaviour; Behavioural Consistency; Resolute Behaviour;

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