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When Allais meets Ulysses: Dynamic Consistency and the Certainty Effect

  • Antoine Nebout
  • Dimitri Dubois

We report experimental findings about subjects’ behavior in dynamic decision problems involving multistage lotteries with different timings of resolution of uncertainty. Our within subject design allows us to study violations of the independence axiom in the light of the dynamic axioms' ones : dynamic consistency, consequentialism and reduction of compound lotteries.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2009-30.pdf
File Function: Revised version, 2012
Download Restriction: no

Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 09-30.

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Length: 8 pages
Date of creation: Dec 2009
Date of revision: Sep 2012
Handle: RePEc:lam:wpaper:09-30
Contact details of provider: Postal: Avenue Raymond Dugrand, CS 79606, 34960 Montpellier Cedex 2
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Web page: http://www.lameta.univ-montp1.fr/

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  1. Uzi Segal, 2000. "Two Stage Lotteries Without the Reduction Axiom," Levine's Working Paper Archive 7599, David K. Levine.
  2. Schmeidler, D. & Karni, E., 1990. "A Temporal Dynamic Consistency And Expected Utility Theory," Papers 39-90, Tel Aviv.
  3. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  4. Volij, Oscar, 1994. "Dynamic Consistency, Consequentialism and The Reduction of Compound Lotteries," Staff General Research Papers 10569, Iowa State University, Department of Economics.
  5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  6. Volij, Oscar, 1994. "Dynamic consistency, consequentialism and reduction of compound lotteries," Economics Letters, Elsevier, vol. 46(2), pages 121-129, October.
  7. Beattie, Jane & Loomes, Graham, 1997. "The Impact of Incentives upon Risky Choice Experiments," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 155-68, March.
  8. Cubitt, Robin P & Starmer, Chris & Sugden, Robert, 1998. "Dynamic Choice and the Common Ratio Effect: An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 108(450), pages 1362-80, September.
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