Dynamic Consistency and Rectangularity for the Smooth Ambiguity Model

Andrei Savochkin, Alexander Shklyaev () and Alexey Galatenko ()
Additional contact information
Alexander Shklyaev: Moscow State University
Alexey Galatenko: Moscow State University

No w0288, Working Papers from New Economic School (NES)

Abstract: We study the Smooth Ambiguity decision criterion in the dynamic setting to understand when it can satisfy the Dynamic Consistency and Consequentialism properties. Our result characterizes the possibility to have these properties through a condition that has the spirit of the rectangularity condition introduced by Epstein and Schneider (2003) for the maxmin model. Rectangularity enables specifying preferences recursively and solving applied models by Dynamic Programming. At the same time, we show that Dynamic Consistency and Consequentialism can be achieved for Smooth Ambiguity preferences in a narrower set of scenarios than one could expect.

Keywords: smooth ambiguity; dynamic consistency; rectangularity JEL Classifications: D81 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-03
New Economics Papers: this item is included in nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.nes.ru/files/Preprints-resh/WP288.pdf (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:abo:neswpt:w0288

Access Statistics for this paper

More papers in Working Papers from New Economic School (NES) Contact information at EDIRC.
Bibliographic data for series maintained by Vladimir Ivanyukhin ( this e-mail address is bad, please contact ).