EconPapers    
Economics at your fingertips  
 

Dynamic consistency, valuable information and subjective beliefs

Spyros Galanis

Economic Theory, 2021, vol. 71, issue 4, No 7, 1467-1497

Abstract: Abstract Ambiguity sensitive preferences must fail either Consequentialism or Dynamic Consistency (DC), two properties that are compatible with subjective expected utility and Bayesian updating, while forming the basis of backward induction and dynamic programming. We examine the connection between these properties in a general environment of convex preferences over monetary acts and find that, far from being incompatible, they are connected in an economically meaningful way. In single-agent decision problems, positive value of information characterises one direction of DC. We propose a weakening of DC and show that one direction is equivalent to weakly valuable information, whereas the other characterises the Bayesian updating of the subjective beliefs which are revealed by trading behavior.

Keywords: Updating; Ambiguity; Dynamic consistency; Bayesian; Consequentialism; Value of information (search for similar items in EconPapers)
JEL-codes: D81 D83 D91 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s00199-021-01351-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:71:y:2021:i:4:d:10.1007_s00199-021-01351-y

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-021-01351-y

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2023-01-10
Handle: RePEc:spr:joecth:v:71:y:2021:i:4:d:10.1007_s00199-021-01351-y