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Are Non-Expected Utility individuals really Dynamically Inconsistent? Experimental Evidence

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  • Antoine Nebout
  • Marc Willinger

Abstract

We investigate whether non-EU agents satisfy strategic dynamic consistency (SDC), i.e. "consistent planning" according to Strotz (1955). Depending on the dynamic axiom that is violated (dynamic consistency, consequentialism or reduction of compound lottery), we categorise non-EU individuals either as naïve, sophisticated or resolute. We rely on experimental data about individual behaviour to built a two-way categorisation of our subjects: firstly, either as EU or non-EU, and secondly either as SDC or non-SDC. Our main finding is that most non-EU subjects satisfy both SDC and dynamic consistency. This result raises an interesting theoretical puzzle about the dynamically consistent behaviour of non-EU agents.

Suggested Citation

  • Antoine Nebout & Marc Willinger, 2014. "Are Non-Expected Utility individuals really Dynamically Inconsistent? Experimental Evidence," Working Papers 14-08, LAMETA, Universtiy of Montpellier, revised Jul 2014.
  • Handle: RePEc:lam:wpaper:14-08
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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2014-08.pdf
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    References listed on IDEAS

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    Cited by:

    1. Konstantinos Georgalos, 2016. "Dynamic decision making under ambiguity," Working Papers 112111041, Lancaster University Management School, Economics Department.
    2. A. Nebout & D. Dubois, 2014. "When Allais meets Ulysses: Dynamic axioms and the common ratio effect," Journal of Risk and Uncertainty, Springer, vol. 48(1), pages 19-49, February.

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