Ulric B. and Evelyn L. Bray Social Sciences Seminar

In a dynamic extension of Gul and Pesendorfer's (2015) (static) Hurwicz Expected Utility (HEU), preferences are defined over information decision problems in which a decision-maker can make his choice from a menu of options contingent on the realization of a signal. Both his static preferences as well as his interim preferences that guide his choice after receipt of the signal admit an HEU representation. Furthermore, the interim preferences are invariant to any choice that the DM could have made had the realization of the signal been different. This allows us to recover his preferences over information decision problems recursively, and implies that any plan of action that was ex ante optimal remains so after receipt of the signal. In addition, Gul and Pesendorfer's concept of a source is extended to any probabilitistically sophisticated source that need only be continuous with respect to non-extreme outcomes. For an information decision problems in which both the signal and the menu of options are measurable with respect to a particular non-extreme-outcome (that is, \neo-")continuous source, it turns out only in the case of a neo-additive source are interim preferences source consistent in the sense they can be formulated entirely in terms of the source and the parameters that characterize the restriction of the decision-maker's static preferences to acts that are adapted to that source.