Dynamically consistent menu preferences

Youichiro Higashi (), Kazuya Hyogo () and Gil Riella ()
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Youichiro Higashi: Okayama University
Kazuya Hyogo: Ryukoku University
Gil Riella: Getulio Vargas Foundation

Economic Theory, 2024, vol. 78, issue 4, No 2, 1047-1074

Abstract: Abstract We provide a unified analysis of dynamically consistent menu preferences in which an agent may exhibit a preference for flexibility, a preference for commitment, or both. Our work generalizes prior results, which investigated this problem for an agent who always exhibits preference for flexibility. By using two types of consistency conditions, we characterize an agent with a subjective state space who reacts to information about her subjective states in a dynamically consistent way. We apply our results to the uncertain strength of temptation and the anticipating regret representations, and characterize a dynamically consistent updating of the no-uncertainty representation.

Keywords: Dynamic consistency; Preference for flexibility; Preference for commitment; Bayesian updating; Subjective state space (search for similar items in EconPapers)
JEL-codes: D11 D81 D91 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00199-024-01593-6

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