Dynamic choice under ambiguity

Artikel

This paper analyzes dynamic choice for ambiguity-sensitive decision makers. It demonstrates that unambiguous behavioral predictions can be obtained, even in the face of dynamic inconsistency, by taking the individual's preferences over decision trees, rather than acts, as primitive. In particular, it leverages preferences over trees to formalize Sophistication as an assumption about the way individuals resolve conflicts between preferences at different decision points. The main result employs Sophistication to provide a behavioral characterization of Consistent Planning (Strotz, 1956). The analysis accommodates arbitrary decision models and updating rules, and delivers unambiguous welfare comparisons. 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 6 ; Year: 2011 ; Issue: 3 ; Pages: 379-421 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Criteria for Decision-Making under Risk and Uncertainty ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Ambiguity ; consistent planning ; value of information

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Siniscalchi, Marciano
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2011

Further information

• DOI: doi:10.3982/TE571
• Handle: http://hdl.handle.net/10419/150159
• Last update: 10.03.2025, 11:42 AM CET