Dynamic consistency and rectangularity for the smooth ambiguity model

A-Tier
Journal: Journal of Economic Theory
Year: 2025
Volume: 225
Issue: C

Authors (3)

Savochkin, Andrei (Università Commerciale Luigi B...) Shklyaev, Alexander (not in RePEc) Galatenko, Alexey (not in RePEc)

Score contribution per author:

1.341 = (α=2.01 / 3 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We study the Smooth Ambiguity decision criterion in the dynamic setting to understand when it can satisfy the Dynamic Consistency and Consequentialism properties. These properties allow one to rewrite the decision criterion recursively and solve for optimal decisions by Dynamic Programming. Our result characterizes the possibility of having these properties through a condition that resembles Epstein and Schneider's (2003) rectangularity condition for the maxmin model. At the same time, we show that Dynamic Consistency and Consequentialism can be achieved for Smooth Ambiguity preferences in a narrower set of scenarios than one would hope for.

Technical Details

RePEc Handle
repec:eee:jetheo:v:225:y:2025:i:c:s0022053125000377
Journal Field
Theory
Author Count
3
Added to Database
2026-01-29