Dynamically consistent CEU preferences on f-convex events

André Lapied () and Pascal Toquebeuf

Mathematical Social Sciences, 2012, vol. 63, issue 3, 252-256

Abstract: We give an axiomatic foundation to the updating rule proposed by Sarin and Wakker [Sarin, R., Wakker, P.P., 1998a. Revealed likelihood and knightian uncertainty. Journal of Risk and Uncertainty 16, 223–250] for CEU preferences. This rule is dynamically consistent but non-consequentialist, since forgone consequences are relevant for conditioning. Whereas it does not work universally, but only when counterfactuals outcomes are better and/or worse than the ones resulting on the conditioning event, the rule has many interesting features, since it is able to describe Ellsberg-type preferences together with a recursive structure of the criterion.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:63:y:2012:i:3:p:252-256

DOI: 10.1016/j.mathsocsci.2012.03.001

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