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A Test of Dynamic Consistency and Consequentialism in the Presence of Ambiguity

Author

Listed:
  • Han Bleichrodt
  • Jurgen Eichberger
  • Simon Grant
  • David Kelsey

    (Department of Economics, University of Exeter)

  • Chen Li

Abstract

We test dynamic consistency and consequentialism, two key principles of dynamic decision making under ambiguity and relate violations of these principles to subjectsÕ ambiguity at- titudes. In our experiment, subjects received a signal which made it attractive for ambiguity averse subjects to deviate from their ex- ante contingent plan and violate dynamic consistency. We found that ambiguity averse subjects were indeed more likely to violate dynamic consistency than ambiguity neutral subjects, but not consequentialism.

Suggested Citation

  • Han Bleichrodt & Jurgen Eichberger & Simon Grant & David Kelsey & Chen Li, 2018. "A Test of Dynamic Consistency and Consequentialism in the Presence of Ambiguity," Discussion Papers 1803, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:1803
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    File URL: https://exetereconomics.github.io/RePEc/dpapers/DP1803.pdf
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    References listed on IDEAS

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    Cited by:

    1. Denis Shishkin & Pietro Ortoleva, 2021. "Ambiguous Information and Dilation: An Experiment," Working Papers 2020-53, Princeton University. Economics Department..
    2. Kellner, Christian & Thordal-Le Quement, Mark & Riener, Gerhard, 2020. "Reacting to ambiguous messages: An experimental analysis," DICE Discussion Papers 357, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Georgalos, Konstantinos, 2021. "Dynamic decision making under ambiguity: An experimental investigation," Games and Economic Behavior, Elsevier, vol. 127(C), pages 28-46.

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    More about this item

    Keywords

    ambiguity; three-color Ellsberg paradox; consequentialism; dynamic consistency;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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