Two rationality arguments are used to justify the link between conditional and unconditional preferences in decision theory: dynamic consistency and consequentialism. Dynamic consistency requires that ex ante contingent choices are respected by updated preferences. Consequentialism states that only those outcomes which are still possible can matter for updated preferences. We test the descriptive validity of these rationality arguments with a dynamic version of Ellsberg's three color experiment and nd that subjects act more often in line with consequentialism than with dynamic consistency.

Subjects are randomization-loving if they prefer random mixtures of two bets to each of the involved bets. Various approaches appeal to such preferences in order to explain uncertainty aversion. We examine the relationship between uncertainty and randomization attitude experimentally. Our data suggests that they are not negatively associated: most uncertainty-averse subjects are randomization-neutral rather than loving. Surprisingly, a non-negligible number of uncertainty-averse subjects even seems to dislike randomization.

This paper explores the relationship between dynamic consistency and the existing notions of unambiguous events for Choquet expected utility preferences. A decision maker is faced with an information structure represented by a filtration. We show that the decision maker's preferences respect dynamic consistency on a fixed filtration if and only if the last stage of the filtration is composed of unambiguous events in the sense of Nehring (1999). Adopting two axioms, conditional certainty equivalence consistency and constrained dynamic consistency to filtration measurable acts, it is shown that the decision maker respects these two axioms on a fixed filtration if and only if the last stage of the filtration is made up of unambiguous events the sense of Zhang (2002).

No abstract

No abstract