Dynamic choice and nonexpected utility

This paper explores how some widely studied classes of nonexpected utility models could be used in dynamic choice situations. A new "sequential consis tency" condition is introduced for single-stage and multi-stage decision pr oblems. Sequential consistency requires that if a decision maker has commit ted to a family of models (e.g., the multiple priors family, the rank-depen dent family, or the betweenness family) then he use the same family through out. Conditions are presented under which dynamic consistency, consequentia lism, and sequential consistency can be simultaneously preserved for a none xpected utility maximizer. An important class of applications concerns case s where the exact sequence of decisions and events, and thus the dynamic st ructure of the decision problem, is relevant to the decision maker. It is s hown that for the multiple priors model, dynamic consistency, consequential ism, and sequential consistency can all be preserved. The result removes th e argument that nonexpected utility models cannot be consistently used in d ynamic choice situations. Rank-dependent and betweenness models can only be used in a restrictive manner, where deviation from expected utility is all owed in at most one stage.