Dynamically consistent CEU preferences on -convex events

André Lapied and Pascal Toquebeuf
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André Lapied: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Pascal Toquebeuf: GAEL - Laboratoire d'Economie Appliquée = Grenoble Applied Economics Laboratory - UPMF - Université Pierre Mendès France - Grenoble 2 - INRA - Institut National de la Recherche Agronomique

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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: 2012-05
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Published in Mathematical Social Sciences, 2012, 63 (3), pp.252-256. ⟨10.1016/j.mathsocsci.2012.03.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04476887

DOI: 10.1016/j.mathsocsci.2012.03.001

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