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Thinking Ahead: The Decision Problem

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  • Patrick Bolton
  • Antoine Faure-Grimaud

Abstract

We propose a model of costly decision making based on time-costs of deliberating current and future decisions. We model an individual decision-maker's thinking process as a thought-experiment that takes time, and lets the decision maker 'think ahead' about future decision problems in yet unrealized states of nature. By formulating an intertemporal, state-contingent, planning problem which may involve costly deliberation in every state of nature, and by letting the decision maker deliberate ahead of the realization of a state, we attempt to capture the basic observation that individuals generally do not think through a complete action plan. Instead, individuals prioritize their thinking and leave deliberations on less important decisions to the time or event when they arise. Copyright 2009, Wiley-Blackwell.

Suggested Citation

  • Patrick Bolton & Antoine Faure-Grimaud, 2009. "Thinking Ahead: The Decision Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(4), pages 1205-1238.
    • Handle: RePEc:oup:restud:v:76:y:2009:i:4:p:1205-1238
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2009.00554.x
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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