Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150159
Authors: 
Siniscalchi, Marciano
Year of Publication: 
2011
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 6 [Year:] 2011 [Issue:] 3 [Pages:] 379-421
Abstract: 
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.
Subjects: 
Ambiguity
consistent planning
value of information
JEL: 
D81
D83
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.