Dynamic Preference “Reversals” and Time Inconsistency

Time inconsistency leads people to revise earlier plans, which has motivated empirical designs attempting to document such choice revisions. We study identification of time inconsistency in designs where an agent’s preferences are elicited in advance at time 0, and then again later at time 1, after they might have received additional decision-relevant information. We show that for single-peaked preferences, the only data that rejects time-consistent expected utility maximization is when an agent’s time-1 ranking between a pair of alternatives is the reverse of their time-0 ranking with probability one. We establish variations of this result under a variety of other assumptions. However, such patterns of choice are rarely observed in practice. To facilitate more robust identification, we present results about special conditions under which the degree of time inconsistency can be estimated.