IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Dynamic Choice Under Ambiguity

  • Marciano Siniscalchi

This paper analyzes sophisticated dynamic choice for ambiguity-sensitive decision makers. It characterizes Consistent Planning via axioms on preferences over decision trees. Furthermore, it shows how to elicit conditional preferences from prior preferences. The key axiom is a weakening of Dynamic Consistency, deemed Sophistication. The analysis accommodates arbitrary decision models and updating rules. Hence, the results indicate that (i) ambiguity attitudes, (ii) updating rules, and (iii) sophisticated dynamic choice are mutually orthogonal aspects of preferences. As an example, a characterization of prior-by-prior Bayesian updating and Consistent Planning for arbitrary maxmin-expected utility preferences is presented. The resulting sophisticated MEU preferences are then used to analyze the value of information under ambiguity; a basic trade-off between information acquisition and commitment is highlighted.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.kellogg.northwestern.edu/research/math/papers/1430.pdf
File Function: main text
Download Restriction: no

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1430.

as
in new window

Length:
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:nwu:cmsems:1430
Contact details of provider: Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Phone: 847/491-3527
Fax: 847/491-2530
Web page: http://www.kellogg.northwestern.edu/research/math/
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Marciano Siniscalchi, 2001. "Bayesian Updating for General Maxmin Expected Utility Preferences," Discussion Papers 1366, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Karni, Edi & Schmeidler, David, 1991. "Atemporal dynamic consistency and expected utility theory," Journal of Economic Theory, Elsevier, vol. 54(2), pages 401-408, August.
  4. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  5. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
  6. Sarin, Rakesh & Wakker, Peter P, 1998. "Dynamic Choice and NonExpected Utility," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 87-119, November.
  7. 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.
  8. Roger B. Myerson, 1986. "Axiomatic Foundations of Bayesian Decision Theory," Discussion Papers 671, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Marciano Siniscalchi, 2003. "A Behavioral Characterization of Plausible Priors," Levine's Bibliography 234936000000000064, UCLA Department of Economics.
  10. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  11. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February.
  12. Larry G. Epstein & Martin Schneider, 2001. "Recursive Multiple-Priors," RCER Working Papers 485, University of Rochester - Center for Economic Research (RCER).
  13. Costis Skiadas, 1998. "Recursive utility and preferences for information," Economic Theory, Springer, vol. 12(2), pages 293-312.
  14. Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, vol. 53(2), pages 137-152, September.
  15. David M Kreps & Evan L Porteus, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Levine's Working Paper Archive 625018000000000009, David K. Levine.
  16. Karni, E. & Safra, Z., 1988. "Ascending Bid Auctions With Behaviorally Consistent Bidders," Papers 1-88, Tel Aviv.
  17. Peleg, Bezalel & Yaari, Menahem E, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 391-401, July.
  18. Jaffray, J.Y., 1992. "Dynamic Decision Making with belief Functions," Papiers d'Economie Mathématique et Applications 92.63, Université Panthéon-Sorbonne (Paris 1).
  19. Caplin, Andrew & Leahy, John, 2006. "The recursive approach to time inconsistency," Journal of Economic Theory, Elsevier, vol. 131(1), pages 134-156, November.
  20. Paolo Ghirardato, 2002. "Revisiting Savage in a conditional world," Economic Theory, Springer, vol. 20(1), pages 83-92.
  21. Harris, Christopher J, 1985. "Existence and Characterization of Perfect Equilibrium in Games of Perfect Information," Econometrica, Econometric Society, vol. 53(3), pages 613-28, May.
  22. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  23. Karni, E. & Safra, Z., 1988. "Behaviorally Consistent Optimal Stopping Rules," Papers 9-88, Tel Aviv.
  24. 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.
  25. 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.
  26. Cubitt, Robin P, 1996. "Rational Dynamic Choice and Expected Utility Theory," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 1-19, January.
  27. Peter Klibanoff & Emre Ozdenoren, 2007. "Subjective recursive expected utility," Economic Theory, Springer, vol. 30(1), pages 49-87, January.
  28. Faruk Gul & Wolfgang Pesendorfer, 2005. "The Case for Mindless Economics," Levine's Working Paper Archive 784828000000000581, David K. Levine.
  29. Karni, Edi & Postlewaite, Andrew, 2005. "David Schmeidler," Games and Economic Behavior, Elsevier, vol. 50(1), pages 1-2, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:1430. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fran Walker)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.