We investigate whether non-EU agents satisfy strategic dynamic consistency (SDC), i.e. “consistent planning” according to Strotz (1955). Depending on the dynamic axiom that is violated (dynamic consistency, consequentialism or reduction of compound lottery), we categorise non-EU individuals either as naïve, sophisticated or resolute. We rely on experimental data about individual behaviour to built a two-way categorisation of our subjects: firstly, either as EU or non-EU, and secondly either as SDC or non-SDC. Our main finding is that most non-EU subjects satisfy both SDC and dynamic consistency. This result raises an interesting theoretical puzzle about the dynamically consistent behaviour of non-EU agents.
Are non-expected utility individuals really dynamically inconsistent? Experimental evidence
21 October 2014