Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret

Hayashi, T. (2011) Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret. Theory and Decision, 70(4), pp. 399-430. (doi:10.1007/s11238-009-9175-x)

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Abstract

We examine if and to what extent choice dispositions can allow dependence on contexts and maintain consistency over time, in a dynamic environment under uncertainty. We focus on one of the context dependence properties, opportunity dependence because of being affected by anticipated regret, where the consequentialist choice framework is maintained. There are two sources of potential inconsistency: one is arrival of information, and the other is changing opportunities. First, we go over the general method of resolution of potential inconsistency, by taking any kinds of inconsistency as given constraints. Second, we characterize a class of choice dispositions that are consistent to information arrival, but may be inconsistent to changing opportunities. Finally, we consider the overall requirement of dynamic consistency and show that it necessarily implies each of consistency to information arrival and independence of choice opportunities. The last result states that the two kinds of potential inconsistency cannot “compensate” each other to recover dynamic consistency overall.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Hayashi, Professor Takashi
Authors: Hayashi, T.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Theory and Decision
ISSN:0040-5833
Published Online:08 October 2009

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