The sophisticated chooser does satisfy dynamic consistency, by construction.
So the money-pump vulnerability isn’t from deviating from a plan; it’s from the plan itself being ex ante dominated. There exists a better plan, but executing it would require behaving at some future node in a way that isn’t locally optimal, which the sophisticated chooser won’t do.
And they also satisfy consequentialism: at each node, they choose based solely on what’s available from that node forward, ignoring closed branches.
So their node-level behavior satisfies independence. At each individual choice point, they act as an EU maximizer would. The problem is that their underlying preferences over compound lotteries may violate independence, and forcing those preferences through the consequentialism-plus-dynamic-consistency filter produces globally suboptimal plans.
Thanks!
The sophisticated chooser does satisfy dynamic consistency, by construction.
So the money-pump vulnerability isn’t from deviating from a plan; it’s from the plan itself being ex ante dominated. There exists a better plan, but executing it would require behaving at some future node in a way that isn’t locally optimal, which the sophisticated chooser won’t do.
And they also satisfy consequentialism: at each node, they choose based solely on what’s available from that node forward, ignoring closed branches.
So their node-level behavior satisfies independence. At each individual choice point, they act as an EU maximizer would. The problem is that their underlying preferences over compound lotteries may violate independence, and forcing those preferences through the consequentialism-plus-dynamic-consistency filter produces globally suboptimal plans.