A Test of Dynamic Consistency and Consequentialism in the Presence of Ambiguity

• Published in: IDEAS Working Paper Series from RePEc
• Main Authors: Bleichrodt, Han, Eichberger, Jurgen, Grant, Simon, Kelsey, David, Chen, Li
• Format: Paper
• Language: English
• Published: St. Louis Federal Reserve Bank of St. Louis 01.01.2018
• Subjects: Consequentialism

We test dynamic consistency and consequentialism, two key principles of dynamic decision making under ambiguity and relate violations of these principles to subjectsÕ ambiguity at- titudes. In our experiment, subjects received a signal which made it attractive for ambiguity averse subjects to deviate from their ex- ante contingent plan and violate dynamic consistency. We found that ambiguity averse subjects were indeed more likely to violate dynamic consistency than ambiguity neutral subjects, but not consequentialism.