Consistent dynamic choice and non-expected utility preferences

André Lapied (1) , Pascal Toquebeuf (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

This paper studies the application of the two most popular non-expected utility (NEU) models -Choquet Expected Utility (CEU) and Maximin Expected Utility (CEU)- to dynamic choice situations in a purely subjective framework. We give an appropriate version of the reduction of compound acts axiom, that states the equivalence between a static and a dynamic choice situation. We show that if consequentialism -only those consequences that can be reached do matter- is additionally assumed, then a monotonic constant linear representation degenerate into expected utility. We envisage two different ways to resolve this problem for the cases where the representation is a CEU or a MEU one. One way consists to weaken the reduction of compound acts axiom, which does not hold on all events. Another way is to relax consequentialism. Then we axiomatically characterize an updating rule for both approaches allowing recursion in several cases.

Mots clés: Choquet expected utility; Maximin expected utility; Consequentialism; Reduction of compound acts; Dynamic choice; Updating

Domaines: Economies et finances

André Lapied, Pascal Toquebeuf. Consistent dynamic choice and non-expected utility preferences. 2009. ⟨hal-00416214⟩