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Dynamically consistent menu preferences

Author

Listed:
  • Youichiro Higashi

    (Okayama University)

  • Kazuya Hyogo

    (Ryukoku University)

  • Gil Riella

    (Getulio Vargas Foundation)

Abstract

We provide a unified analysis of dynamically consistent menu preferences in which an agent may exhibit a preference for flexibility, a preference for commitment, or both. Our work generalizes prior results, which investigated this problem for an agent who always exhibits preference for flexibility. By using two types of consistency conditions, we characterize an agent with a subjective state space who reacts to information about her subjective states in a dynamically consistent way. We apply our results to the uncertain strength of temptation and the anticipating regret representations, and characterize a dynamically consistent updating of the no-uncertainty representation.

Suggested Citation

  • Youichiro Higashi & Kazuya Hyogo & Gil Riella, 2024. "Dynamically consistent menu preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1047-1074, December.
    • Handle: RePEc:spr:joecth:v:78:y:2024:i:4:d:10.1007_s00199-024-01593-6
    DOI: 10.1007/s00199-024-01593-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic consistency; Preference for flexibility; Preference for commitment; Bayesian updating; Subjective state space;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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