Year: 2006
Type: preprint
Abstract: We propose and axiomatically characterize dynamically consistent update rules for decision making under ambiguity. These rules apply to the preferences with multiple priors of Gilboa and Schmeidler (1989), and are the first, for any model of preferences over acts, to be able to reconcile typical behavior in the face of ambiguity (as exemplified by Ellsberg's paradox) with dynamic consistency for all non-null events. Updating takes the form of applying Bayes' rule to subsets of the set of priors, where the specific subset depends on the preferences, the conditioning event, and the choice problem (i.e., a feasible set of acts together with an act chosen from that set).
Source: SSRN Electronic Journal
DOI: 10.2139/ssrn.899006
Authors: Eran Hanany, Peter Klibanoff
Institutions: Tel Aviv University, Northwestern University
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125898803