An agent who violates independence can avoid dynamic inconsistency in sequential choice if he is sophisticated enough to make use of backward induction in planning. However, Seidenfeld has demonstrated that such a sophisticated agent with dependent preferences is bound to violate the principle of dynamic substitution, according to which admissibility of a plan is preserved under substitution of indifferent options at various choice nodes in the decision tree. Since Seidenfeld considers dynamic substitution to be a coherence condition on dynamic choice, (...) he concludes that sophistication cannot save a violator of independence from incoherence. In response to McClennen’s objection that relying on dynamic substitution when independence is at stake must be question-begging, Seidenfeld undertakes to prove that dynamic substitution follows from the principle of backward induction alone, provided we assume that the agent’s admissible choices from different sets of feasible plans are all based on a fixed underlying preference ordering of plans. This paper shows that Seidenfeld's proof fails: depending on the interpretation, it is either invalid or based on an unacceptable assumption. (shrink)

An agent whose preferences violate the Independence Axiom or for some other reason are not representable by an expected utility function, can avoid 'dynamic inconsistency' either by foresight ('sophisticated choice') or by subsequent adjustment of preferences to the chosen plan of action ('resolute choice'). Contrary to McClennen and Machina, among others, it is argued these two seemingly conflicting approaches to 'dynamic rationality' need not be incompatible. 'Wise choice' reconciles foresight with a possibility of preference adjustment by rejecting the two assumptions (...) that create the conflict: Separability of Preferences in the case of sophisticated choice and Reduction to Normal form in the case of resolute choice.. (shrink)