Testing dynamic consistency and consequentialism under ambiguity

Accounting for ambiguity aversion in dynamic decisions generally implies that either consistency or consequentialism must be given up. To gain insight into which of these principles better describes people’s preferences, we tested them using a variation Ellsberg’s three-color urn experiment. Subjects were asked to make choice both before and after they received signal. We found most neutral subjects satisfied behaved consistent with subjective expected utility Bayesian updating. The majority averse consequentialism, but violated consistency.