Dynamically consistent CEU preferences

André Lapied () and Pascal Toquebeuf

Working Papers from HAL

Abstract: We give an axiomatic foundation to the updating rule proposed by [Sarin, R. and Wakker, P. P. (1998). Revealed likelihood and knightian uncertainty. Journal of Risk and Uncertainty 16(3):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 Ellsbergtype preferences together with a recursive structure of the criterion.

Keywords: Choquet Expected Utility; Capacities; Dynamic consistency; Updating (search for similar items in EconPapers)
Date: 2011-11-23
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