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Anticipating Preference Reversal"

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  • Le Yaouanq, Yves

Abstract

This paper studies the consistency between a decision-maker's choices over menus in a first period and inside menus at a later date. The main result shows that the comparison of commitment decisions and actual subsequent choices reveals whether future taste contingencies are correctly anticipated: a sophisticated individual chooses exactly the right commitment options, whereas a naive decision-maker overlooks some profitable opportunities. The paper provides absolute and comparative measures of naivete and shows under which conditions pessimistic behavior can be attributed to the presence of self-control costs. Finally, I implement an experimental protocol based on the theoretical analysis and find substantial evidence of naivete at the individual level.

Suggested Citation

  • Le Yaouanq, Yves, 2015. "Anticipating Preference Reversal"," TSE Working Papers 15-585, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:29461
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    References listed on IDEAS

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    Cited by:

    1. David S. Ahn & Ryota Iijima & Yves Le Yaouanq & Todd Sarver, 2017. "Behavioral Characterizations of Naivet� for Time-Inconsistent Preferences," Cowles Foundation Discussion Papers 2074R, Cowles Foundation for Research in Economics, Yale University, revised Nov 2018.
    2. David S. Ahn & Ryota Iijima & Todd Sarver, 2017. "Naivet� About Temptation and Self-Control: Foundations for Naive Quasi-Hyperbolic Discounting," Cowles Foundation Discussion Papers 2099, Cowles Foundation for Research in Economics, Yale University.

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    More about this item

    Keywords

    Self-control; Naivete; Temptation; Stochastic choice; Random Strotz;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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