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

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 a ‘minimal’ case of context dependence, opportunity dependence due to being affected by anticipated regret. 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 full requirement of dynamic consistency and show that it necessarily implies independence of choice opportunities. ∗This is a substantial revision of the paper previously circulated as ‘Dynamic choice with anticipated regret.’ I thank conference/seminar participants at RUD 2006, ES-NASM 2008, Texas A&M and Yokohama National University for helpful comments. Part of this work was done during my visit to the Institute of Economic Research, Kyoto University. I gratefully appreciate their hospitality. All errors are mine.