A universal update rule for consistent choice

Research output: Working paper

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Abstract

We propose a framework for complete preference orderings that reconciles two existing principles for conditional choice, without compromise: plan consistency, taking replacement values as non-consequentialist updates, and sequential consistency, identifying one of these updates as the consequentialist one, by a fixed point rule. The static axioms of the framework characterize their existence and uniqueness, and exclude forms of Dutch book opportunities. The normative claim relies on the global interpretation of preference orderings.

We review some implications for preferences based on multiple priors, address an issue in updating capacities, and suggest a weakening of the comonotonicity axiom.

The framework supports weak decomposability, as one of the possible directions to weaken the Sure Thing Principle, and betweenness, as the only one under law invariance. We indicate how betweenness accommodates the inverted S-shaped probability weighting common in Prospect Theory, and conclude that the commonly adopted narrow boundaries of rational choice need thorough revision.
Original languageEnglish
Number of pages39
Publication statusUnpublished - 9 Oct 2019

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