Dynamic consistency in extensive form decision problems

Abstract

In a stimulating paper, Piccione and Rubinstein (1997) argued how a decision maker could undertake dynamically inconsistent choices when, in an extensive form decision problem, she has a particular type of imperfect recall named absentmindedness. Such memory limitation obtains whenever information sets include decision histories along the same decision path. Starting from work focusing on the absentminded driver example, and independently developed by Segal (2000) and Dimitri (1999), the main theorem of this article provides a general result of dynamically consistent choices, valid for a large class of finite extensive form decision problems without nature.