Galanis, S. ORCID: 0000-0003-4286-7449 (2021).
Dynamic Consistency, Subjective Beliefs and Valuable Information.
Economic Theory,
Abstract
Ambiguity sensitive preferences must fail either Consequentialism or Dynamic Consistency (DC), two properties that are compatible with subjective expected utility and Bayesian updating, while forming the basis of backward induction and dynamic programming. We examine the connection between these properties in a general environment of convex preferences over monetary acts and find that, far from being incompatible, they are connected in an economically meaningful way. In single-agent decision problems, positive value of information characterises one direction of DC. We propose a weakening of DC and show that one direction is equivalent to weakly valuable information, whereas the other characterises the Bayesian updating of the subjective beliefs which are revealed by trading behavior.
Publication Type: | Article |
---|---|
Additional Information: | This is a post-peer-review, pre-copyedit version of an article to be published in Economic Theory. The final authenticated version will be available online at: http://link.springer.com/journal/199 |
Publisher Keywords: | Updating, Ambiguity, Dynamic Consistency, Bayesian, Consequentialism, Value of Information |
Subjects: | H Social Sciences > HB Economic Theory |
Departments: | School of Arts & Social Sciences > Economics |
Date Deposited: | 24 Feb 2021 15:39 |
URI: | https://openaccess.city.ac.uk/id/eprint/25717 |
![]() |
Text
- Accepted Version
This document is not freely accessible due to copyright restrictions. To request a copy, please use the button below. Request a copy |
Export
Downloads
Downloads per month over past year
Actions (login required)
![]() |
Admin Login |