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Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret

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Abstract

We examine if and to what extent choice dispositions can allow dependence on contexts and maintain consistency over time, in a dynamic environment under uncertainty. We focus on one of the context dependence properties, opportunity dependence because of being affected by anticipated regret, where the consequentialist choice framework is maintained. There are two sources of potential inconsistency: one is arrival of information, and the other is changing opportunities. First, we go over the general method of resolution of potential inconsistency, by taking any kinds of inconsistency as given constraints. Second, we characterize a class of choice dispositions that are consistent to information arrival, but may be inconsistent to changing opportunities. Finally, we consider the overall requirement of dynamic consistency and show that it necessarily implies each of consistency to information arrival and independence of choice opportunities. The last result states that the two kinds of potential inconsistency cannot “compensate” each other to recover dynamic consistency overall.

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Authors and Affiliations

  1. Department of Economics, University of Texas at Austin, Austin, USA

    Takashi Hayashi

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  1. Takashi Hayashi
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Correspondence to Takashi Hayashi.

Additional information

This is a substantial revision of the article previously circulated as “Dynamic choice with anticipated regret.” I thank the participants of conference/seminar at RUD 2006, ES-NASM 2008, Texas A&M, and Yokohama National University for helpful comments. Part of this study was done during my visit to the Institute of Economic Research, Kyoto University. I gratefully appreciate their hospitality.

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Hayashi, T. Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret. Theory Decis 70, 399–430 (2011). https://doi.org/10.1007/s11238-009-9175-x

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  • DOI: https://doi.org/10.1007/s11238-009-9175-x

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