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CEU preferences and dynamic consistency

  • Eichberger, Jurgen
  • Grant, Simon
  • Kelsey, David

This paper investigates the dynamic consistency of CEU preferences. A decision maker is faced with an information structure represented by a fixed filtration. If beliefs are represented by a convex capacity, we show that a necessary and sufficient condition for dynamic consistency is that beliefs be additive over the final stage in the filtration.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165-4896(04)00074-5
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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 49 (2005)
Issue (Month): 2 (March)
Pages: 143-151

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Handle: RePEc:eee:matsoc:v:49:y:2005:i:2:p:143-151
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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  1. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February.
  2. Kelsey, D. & Milne, F., 1996. "Induced Preferences, Non Additive Probabilities and Multiple Priors," Discussion Papers 96-15, Department of Economics, University of Birmingham.
  3. Larry G. Epstein, 1999. "A Definition of Uncertainty Aversion," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 579-608.
  4. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
  5. Eichberger, J. & Kelsey, D., 1993. "Uncertainty Aversion and Dynamic Consistency," Discussion Papers 93-08, Department of Economics, University of Birmingham.
  6. Jerry Green, 1987. ""Making Book Against Oneself," the Independence Axiom, and Nonlinear Utility Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 785-796.
  7. Simon Grant & Atsushi Kajii & Ben Polak, 2000. "Temporal Resolution of Uncertainty and Recursive Non-Expected Utility Models," Econometrica, Econometric Society, vol. 68(2), pages 425-434, March.
  8. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  9. Itzhak Gilboa & David Schmeidler, 1989. "Maxmin Expected Utility with Non-Unique Prior," Post-Print hal-00753237, HAL.
  10. George Wu, 1999. "Anxiety and Decision Making with Delayed Resolution of Uncertainty," Theory and Decision, Springer, vol. 46(2), pages 159-199, April.
  11. Green, Jerry, 1987. ""Making book against oneself," the Independence Axiom, and Nonlinear Utility Theory," Scholarly Articles 3203640, Harvard University Department of Economics.
  12. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February.
  13. Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, vol. 53(2), pages 137-152, September.
  14. Sarin, Rakesh K & Wakker, Peter, 1992. "A Simple Axiomatization of Nonadditive Expected Utility," Econometrica, Econometric Society, vol. 60(6), pages 1255-72, November.
  15. Epstein Larry G. & Le Breton Michel, 1993. "Dynamically Consistent Beliefs Must Be Bayesian," Journal of Economic Theory, Elsevier, vol. 61(1), pages 1-22, October.
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