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

  • Nathalie Etchart(-Vincent)

    ()

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - ENGREF - Ecole Nationale du Génie Rural, des Eaux et des Forêts - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique, GRID - Groupe de Recherche sur le risque, l'Information et la Décision - CNRS - Centre National de la Recherche Scientifique - ENS Cachan - École normale supérieure - Cachan)

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: we show that usual arguments linking violations of DC to departures from IND are 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. Our 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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Date of creation: 05 Oct 2005
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Handle: RePEc:hal:ciredw:halshs-00004832
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