Dynamic Decision Theory

Abstract

This chapter considers the controversial relationship between dynamic choice models, which depict a series of choices over time, and the more familiar static choice models, which depict a single ‘one-shot-only’ decision. An initial issue concerns how to reconcile the normative advice of these two models: Should an agent take account of the broader dynamic context when making a decision, and if so, in a sophisticated manner (the orthodox backwards induction approach), or rather in a resolute manner (which takes the past as well as the future to be significant)? Further controversies concern what the dynamic implications of an agent’s preferences reveal about the (ir)rationality of these preferences. Show more