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Induced Preferences, Dynamic Consistency and Dutch Books
Author(s) -
Kelsey David,
Milne Frank
Publication year - 1997
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00091
Subject(s) - observable , consistency (knowledge bases) , decision maker , preference , subjective expected utility , expected utility hypothesis , space (punctuation) , economics , mathematical economics , econometrics , revealed preference , microeconomics , mathematics , computer science , management science , discrete mathematics , physics , quantum mechanics , operating system
We assume that a decision‐maker has expected utility preferences over a large space which includes some variables not observable by the theorist. These will induce preferences over observable variables, which typically will not have the expected utility form. This paper focuses on implications for multi‐period decisions. We show that such preferences are not vulnerable to ‘Dutch books’. In particular, we consider preferences arising from non‐additive subjective probabilities and show how they can arise as induced preferences.