Abstract
When the preferences of a decision maker over risky prospects are nonlinear in the probabilities he may display dynamic inconsistency in sequential decisions. In this paper we present the notion of behavioral consistency as a way of modelling individual behavior in situations involving sequential choice of decision makers whose preferences are nonlinear in the probabilities. According to this approach each decision maker is represented by a set of agents, one agent for each decision node. Consistent behavior is the perfect-Nash equilibrium in the game among the agents. We discuss the application of this idea to the analysis of games induced by ascending-bid auctions and by search. Finally, we contrast this approach with an alternative approach which is based on nonconsequentialism.
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© 1991 Springer Science+Business Media Dordrecht
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Karni, E., Safra, Z. (1991). Behavioral Consistency In Sequential Decisions. In: Chikán, A. (eds) Progress in Decision, Utility and Risk Theory. Theory and Decision Library, vol 13. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-3146-9_30
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DOI: https://doi.org/10.1007/978-94-011-3146-9_30
Publisher Name: Springer, Dordrecht
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