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Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret

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  • Takashi Hayashi

    (Department of Economics, University of Texas at Austin)

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    Abstract

    We examine if and to what extent choice dispositions can allow dependence on contexts and maintain consistency over time, in a dynamic environment under uncertainty. We focus on a 'minimal' case of context dependence, opportunity dependence due to being affected by anticipated regret. There are two sources of potential inconsistency, one is arrival of information and the other is changing opportunities. First, we go over the general method of resolution of potential inconsistency, by taking any kinds of inconsistency as given constraints. Second, we characterize a class of choice dispositions that are consistent to information arrival but may be inconsistent to changing opportunities. Finally, we consider the full requirement of dynamic consistency and show that it necessarily implies independence of choice opportunities.

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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP659.pdf
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    Bibliographic Info

    Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 659.

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    Length: 37pages
    Date of creation: Aug 2008
    Date of revision:
    Handle: RePEc:kyo:wpaper:659

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    Cited by:
    1. Hayashi, Takashi, 2009. "Stopping with anticipated regret," Journal of Mathematical Economics, Elsevier, vol. 45(7-8), pages 479-490, July.

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