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Imperfect Recall and Time Inconsistencies: An experimental test of the absentminded driver "paradox"

  • Vittoria M. Levati

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

  • Matthias Uhl

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

  • Ro'i Zultan

    ()

    (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)

Absentmindedness is a special case of imperfect recall which according to Piccione and Rubinstein (1997a) leads to time inconsistencies. Aumann, Hart and Perry (1997a) question their argument and show how dynamic inconsistencies can be resolved. The present paper explores this issue from a descriptive point of view by examining the behavior of absentminded individuals in a laboratory environment. Absentmindedness is manipulated in two ways. In one treatment, it is induced by cognitively overloading participants. In the other, it is imposed by randomly matching decisions with decision nodes in the information set. The results provide evidence for time inconsistencies in all treatments. We introduce a behavioral principal, which best explains the data.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-035.

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Date of creation: 16 Jun 2010
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Handle: RePEc:jrp:jrpwrp:2010-035
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  1. Lipman, Barton L., 1997. "More Absentmindedness," Games and Economic Behavior, Elsevier, vol. 20(1), pages 97-101, July.
  2. Deck, Cary & Sarangi, Sudipta, 2009. "Inducing imperfect recall in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 69(1), pages 64-74, January.
  3. Gilboa, Itzhak, 1997. "A Comment on the Absent-Minded Driver Paradox," Games and Economic Behavior, Elsevier, vol. 20(1), pages 25-30, July.
  4. Grove, Adam J. & Halpern, Joseph Y., 1997. "On the Expected Value of Games with Absentmindedness," Games and Economic Behavior, Elsevier, vol. 20(1), pages 51-65, July.
  5. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
  6. Epstein, Larry G. & Schneider, Martin, 2003. "Recursive multiple-priors," Journal of Economic Theory, Elsevier, vol. 113(1), pages 1-31, November.
  7. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  8. Board, Oliver, 2003. "The not-so-absent-minded driver," Research in Economics, Elsevier, vol. 57(3), pages 189-200, September.
  9. Aumann, Robert J. & Hart, Sergiu & Perry, Motty, 1997. "The Forgetful Passenger," Games and Economic Behavior, Elsevier, vol. 20(1), pages 117-120, July.
  10. Halpern, Joseph Y., 1997. "On Ambiguities in the Interpretation of Game Trees," Games and Economic Behavior, Elsevier, vol. 20(1), pages 66-96, July.
  11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  12. Jeffrey Kline, 2005. "Imperfect recall and the relationships between solution concepts in extensive games," Economic Theory, Springer, vol. 25(3), pages 703-710, 04.
  13. Lehrer, Ehud, 1988. "Repeated games with stationary bounded recall strategies," Journal of Economic Theory, Elsevier, vol. 46(1), pages 130-144, October.
  14. Aumann, Robert J. & Hart, Sergiu & Perry, Motty, 1997. "The Absent-Minded Driver," Games and Economic Behavior, Elsevier, vol. 20(1), pages 102-116, July.
  15. Battigalli, Pierpaolo, 1997. "Dynamic Consistency and Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 31-50, July.
  16. Yaakov Kareev & Massimo Warglien, 2003. "Cognitive Overload and the Evaluation of Risky Alternatives: The Effects of Sample Size, Information Format and Attitude To Risk," Discussion Paper Series dp340, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
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