Boundedly rational backward induction

Shaowei Ke

Theoretical Economics, 2019, vol. 14, issue 1

Abstract: This paper proposes simple axioms that characterize a generalization of backward induction. At any node of a decision tree, the decision maker looks forward a fixed number of stages perfectly. Beyond that, the decision maker aggregates continuation values according to a function that captures reasoning under unpredictability. The model is uniquely identified from the decision maker's preference over decision trees. Confronting a decision tree, the decision maker iteratively revises her plan for the future as she moves forward in the decision tree. A comparative measure of unpredictability aversion and several examples are discussed.

Keywords: Dynamic choice; imperfect foresight; time inconsistency (search for similar items in EconPapers)
JEL-codes: D00 (search for similar items in EconPapers)
Date: 2019-01-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://econtheory.org/ojs/index.php/te/article/viewFile/20190103/22773/672 (application/pdf)

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:the:publsh:2402

Access Statistics for this article

Theoretical Economics is currently edited by Federico Echenique, Mira Frick, Pablo Kurlat, Juuso Toikka, Rakesh Vohra

More articles in Theoretical Economics from Econometric Society
Bibliographic data for series maintained by Martin J. Osborne ().