Naive, resolute or sophisticated? A study of dynamic decision making
AbstractDynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency. Economic theorists have identified three possible responses â to act naively (thus ignoring the dynamic inconsistency), to act resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their inconsistency). We use data from a unique experiment (which observes both decisions and evaluations) in order to distinguish these three possibilities. We find that the majority of subjects are either naÃ¯ve or resolute (with slightly more being naÃ¯ve) but very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Risk and Uncertainty.
Volume (Year): 38 (2009)
Issue (Month): 1 (February)
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Web page: http://www.springerlink.com/link.asp?id=100299
Dynamic decision making; Naivety; Sophistication; Resoluteness; Dynamic inconsistencies; D90; D80; C91;
Other versions of this item:
- John D Hey & Gianna Lotito, 2007. "Naïve, Resolute or Sophisticated? A Study of Dynamic Decision Making," Discussion Papers 07/03, Department of Economics, University of York.
- D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
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