Dynamically consistent CEU preferences
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.
|Date of creation:||23 Nov 2011|
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