DYNAMICALLY CONSISTENT CHOICE AND THE REVELATION OF STROTZ-POLLAK EQUILIBRIUM

The purpose of this essay is to provide a revealed preference analysis of the concept of ''dynamically consistent'' choice in a decision tre e without chance nodes. It is shown that myopic rationality with respe ct to a stationary weak order is characterized by Arrow's version of t he Weak Axiom of Revealed Preference, and that perfect rationality is characterized by Chernoff's condition Alpha. Since the latter concept of dynamic rationality is based upon the selection of a Strotz-Pollak equilibrium as a game-theoretic solution, it is concluded that conditi on Alpha alone provides a proper choice-theoretic definition of ''dyna mic consistency''.