Consistent dynamic choice and non-expected utility preferences
AbstractThis paper studies the application of the two most popular non-expected utility (NEU) models -Choquet Expected Utility (CEU) and Maximin Expected Utility (CEU)- to dynamic choice situations in a purely subjective framework. We give an appropriate version of the reduction of compound acts axiom, that states the equivalence between a static and a dynamic choice situation. We show that if consequentialism -only those consequences that can be reached do matter- is additionally assumed, then a monotonic constant linear representation degenerate into expected utility. We envisage two different ways to resolve this problem for the cases where the representation is a CEU or a MEU one. One way consists to weaken the reduction of compound acts axiom, which does not hold on all events. Another way is to relax consequentialism. Then we axiomatically characterize an updating rule for both approaches allowing recursion in several cases.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number hal-00416214.
Date of creation: 13 Sep 2009
Date of revision:
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00416214/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Choquet expected utility; Maximin expected utility; Consequentialism; Reduction of compound acts; Dynamic choice; Updating;
Other versions of this item:
- André Lapied & Pascal Tocquebeuf, 2007. "Consistent Dynamice Choice And Non-Expected Utility Preferences," Working Papers halshs-00353880, HAL.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wang, Tan, 2003. "Conditional preferences and updating," Journal of Economic Theory, Elsevier, vol. 108(2), pages 286-321, February.
- Klibanoff, Peter & Hanany, Eran, 2007. "Updating preferences with multiple priors," Theoretical Economics, Econometric Society, vol. 2(3), September.
- Uzi Segal, 2000.
"Two Stage Lotteries Without the Reduction Axiom,"
Levine's Working Paper Archive
7599, David K. Levine.
- Wakker, Peter, 1989. "Continuous subjective expected utility with non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 18(1), pages 1-27, February.
- Eichberger, Jurgen & Grant, Simon & Kelsey, David, 2005.
"CEU preferences and dynamic consistency,"
Mathematical Social Sciences,
Elsevier, vol. 49(2), pages 143-151, March.
- Gilboa Itzhak & Schmeidler David, 1993.
"Updating Ambiguous Beliefs,"
Journal of Economic Theory,
Elsevier, vol. 59(1), pages 33-49, February.
- Kiyohiko G. Nishimura & Hiroyuki Ozaki, 2003. "A Simple Axiomatization of Iterated Choquet Objectives," CIRJE F-Series CIRJE-F-219, CIRJE, Faculty of Economics, University of Tokyo.
- Paolo Ghirardato, 2002. "Revisiting Savage in a conditional world," Economic Theory, Springer, vol. 20(1), pages 83-92.
- Paolo Ghirardato & Fabio Maccheroni & Massimo Marinacci & Marciano Siniscalchi, 2001.
"A subjective spin on roulette wheels,"
ICER Working Papers - Applied Mathematics Series
17-2001, ICER - International Centre for Economic Research, revised Aug 2001.
- Volij, Oscar, 1994. "Dynamic Consistency, Consequentialism and The Reduction of Compound Lotteries," Staff General Research Papers 10569, Iowa State University, Department of Economics.
- Schmeidler, D. & Karni, E., 1990.
"A Temporal Dynamic Consistency And Expected Utility Theory,"
39-90, Tel Aviv.
- Karni, Edi & Schmeidler, David, 1991. "Atemporal dynamic consistency and expected utility theory," Journal of Economic Theory, Elsevier, vol. 54(2), pages 401-408, August.
- Ramon Casadesus-Masanell & Peter Klibanoff & Emre Ozdenoren, 1998. "Maximum Expected Utility over Savage Acts with a Set of Priors," Discussion Papers 1218, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Larry G. Epstein & Martin Schneider, 2001.
RCER Working Papers
485, University of Rochester - Center for Economic Research (RCER).
- Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
- Sarin, Rakesh & Wakker, Peter P, 1998. "Dynamic Choice and NonExpected Utility," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 87-119, November.
- Dominiak, Adam & Lefort, Jean-Philippe, 2009.
"Unambiguous Events and Dynamic Choquet Preferences,"
0489, University of Heidelberg, Department of Economics.
- Adam Dominiak & Jean-Philippe Lefort, 2011. "Unambiguous events and dynamic Choquet preferences," Economic Theory, Springer, vol. 46(3), pages 401-425, April.
- Kreps, David M & Porteus, Evan L, 1978.
"Temporal Resolution of Uncertainty and Dynamic Choice Theory,"
Econometric Society, vol. 46(1), pages 185-200, January.
- David M Kreps & Evan L Porteus, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Levine's Working Paper Archive 625018000000000009, David K. Levine.
- Volij, Oscar, 1994. "Dynamic consistency, consequentialism and reduction of compound lotteries," Economics Letters, Elsevier, vol. 46(2), pages 121-129, October.
- Eichberger, Jurgen & Grant, Simon & Kelsey, David, 2007.
"Updating Choquet beliefs,"
Journal of Mathematical Economics,
Elsevier, vol. 43(7-8), pages 888-899, September.
- Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
- Alain Chateauneuf & Robert Kast & AndrÃ© Lapied, 2001. "Conditioning Capacities and Choquet Integrals: The Role of Comonotony," Theory and Decision, Springer, vol. 51(2), pages 367-386, December.
- Casadesus-Masanell, Ramon & Klibanoff, Peter & Ozdenoren, Emre, 2000. "Maxmin Expected Utility over Savage Acts with a Set of Priors," Journal of Economic Theory, Elsevier, vol. 92(1), pages 35-65, May.
- Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Robert Kast & André Lapied, 2010.
"Valuing future cash flows with non separable discount factors and non additive subjective measures: conditional Choquet capacities on time and on uncertainty,"
Theory and Decision,
Springer, vol. 69(1), pages 27-53, July.
- Robert Kast & André Lapied, 2008. "Valuing future cash flows with non separable discount factors and non additive subjective measures: Conditional Choquet Capacities on Time and on Uncertainty," Working Papers 08-09, LAMETA, Universtiy of Montpellier, revised Jun 2008.
- Robert Kast, 2011. "Managing financial risks due to natural catastrophes," Working Papers hal-00610241, HAL.
- Robert Kast & André Lapied & Pascal Toquebeuf, 2008. "Updating Choquet Integrals , Consequentialism and Dynamic Consistency," ICER Working Papers - Applied Mathematics Series 04-2008, ICER - International Centre for Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.