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Dynamically consistent CEU preferences

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Listed:
  • Andre Lapied
  • Pascal Toquebeuf

Abstract

We give an axiomatic foundation to the updating rule proposed by [Sarin, R. and Wakker, P. P. (1998). Revealed likelihood and knightian uncertainty. Journal of Risk and Uncertainty 16(3):223-250.] for CEU preferences. This rule is dynamically consistent but non-consequentialist, since forgone consequences are relevant for conditioning. Whereas it does not work universally, but only when counterfactuals outcomes are better and/or worse than the ones resulting on the conditioning event, the rule has many interesting features, since it is able to describe Ellsbergtype preferences together with a recursive structure of the criterion.
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Suggested Citation

  • Andre Lapied & Pascal Toquebeuf, 2012. "Dynamically consistent CEU preferences," TEPP Working Paper 2012-10, TEPP.
    • Handle: RePEc:tep:teppwp:wp12-10
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    References listed on IDEAS

    as
    1. André Lapied & Pascal Toquebeuf, 2010. "Atemporal non-expected utility preferences, dynamic consistency and consequentialism," Economics Bulletin, AccessEcon, vol. 30(2), pages 1661-1669.
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