Cogley, Tim W.; J. Sargent, Thomas - Economics Department, University of California-Davis - 2005
updating of probabili- ties. For a range of consumption smoothing examples, the anticipated utility approximation outperforms … the decision maker knows the transition probabilities. The second approximation is a version of Kreps’ (1998) anticipated … utility model in which decision makers update using Bayes’ law but optimize in a way that is myopic with respect to their …