Naïve, 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 – 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 naïve or resolute (with slightly more being naïve) but very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 07/03.
Date of creation: Feb 2007
Date of revision:
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Dynamic decision making; naivety; sophistication; resoluteness; dynamic inconsistencies;
Other versions of this item:
- John Hey & Gianna Lotito, 2009. "Naive, resolute or sophisticated? A study of dynamic decision making," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 1-25, February.
- D90 - Microeconomics - - Intertemporal Choice - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-03 (All new papers)
- NEP-CBE-2007-03-03 (Cognitive & Behavioural Economics)
- NEP-EXP-2007-03-03 (Experimental Economics)
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