Journal of Risk and Uncertainty

, Volume 9, Issue 3, pp 231–238 | Cite as

Unbounded behaviorally consistent stopping rules

  • Edi Karni
  • Zvi Safra
Article

Abstract

In this article we study behaviorally consistent stopping rules in an unbounded search from a known distribution with no recall and with positive search cost. We show that if the searcher's preferences are quasi-convex in the probabilities, then behaviorally consistent search strategies in the unbounded case are obtained as limits of the corresponding bounded search strategies and are characterized by reservation levels property. Unlike optimal stopping rules under expected utility theory, however, the reservation levels may not be monotonically increasing in the number of permissible stages of the search process, and, in the unbounded case, may not be unique.

Key words

behavioral consistency stopping rules nonexpected utility 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Border, Kim C., and Uzi Segal. (1994). “Dynamic Consistency Implies Expected Utility (Almost),”Journal of Economic Theory, 63, 170–188.Google Scholar
  2. DeGroot, Morris. (1970).Optimal Statistical Decisions, New York: McGraw-Hill.Google Scholar
  3. Dekel, Eddie, Safra Zvi, and Uzi Segal. (1991). “Existence and Dynamic Consistency with Nonexpected Utility Preferences,”Journal of Economic Theory 55, 229–246.Google Scholar
  4. Karni, Edi, and Zvi Safra. (1990). “Behaviorally Consistent Optimal Stopping Rules,”Journal of Economic Theory 51, 391–402.Google Scholar
  5. Karni, Edi, and David Schmeidler. (1991a). “Utility Theory with Uncertainty.” In W. Hildenbrand and H. Sonnenschein (eds.),Handbook of Mathematical Economics, Vol. 4. Amsterdam: North Holland.Google Scholar
  6. Karni, Edi, and David Schmeidler. (1991b). “Atemporal Dynamic Consistency and Expected Utility Theory,”Journal of Economic Theory 54, 401–408.Google Scholar
  7. Machina, Mark J. (1982). “Expected Utility Analysis without the Independence Axiom,”Econometrica 50, 277–323.Google Scholar
  8. Machina, Mark J. (1989). “Dynamic Consistency and Nonexpected Utility Models of Choice Under Uncertainty,”Journal of Economics Literature 27, 1622–1668.Google Scholar
  9. Nashed, M. Z. (1966). “Some Remarks on Variations and Differentials,”American Mathematical Monthly 73, 63–76.Google Scholar
  10. Segal, Uzi. (1990). “Two Stage Lotteries without the Reduction Axiom,”Econometrica 58, 349–378.Google Scholar

Copyright information

© Kluwer Academic Publishers 1994

Authors and Affiliations

  • Edi Karni
    • 1
  • Zvi Safra
    • 2
  1. 1.Department of EconomicsThe Johns Hopkins UniversityBaltimoreUSA
  2. 2.Faculty of ManagementTel Aviv UniversityTel AvivIsrael

Personalised recommendations