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Behavioral Characterizations of Naivete for Time-Inconsistent Preferences

Author

Listed:
  • Ahn, David S.

    (University of California)

  • Iijima, Ryota

    (Yale University)

  • Le Yaouanq, Yves

    (LMU Munich)

  • Sarver, Todd

    (Duke University)

Abstract

We propose nonparametric definitions of absolute and comparative naivete. These definitions leverage ex-ante choice of menu to identify predictions of future behavior and ex-post (random) choices from menus to identify actual behavior. The main advantage of our definitions is their independence from any assumed functional form for the utility function representing behavior. An individual is sophisticated if she is indifferent ex ante between retaining the option to choose from a menu ex post or committing to her actual distribution of choices from that menu. She is naive if she prefers the flexibility in the menu, reflecting a mistaken belief that she will act more virtuously than she actually will. We propose two definitions of comparative naivete and explore the restrictions implied by our definitions for several prominent models of time inconsistency.

Suggested Citation

  • Ahn, David S. & Iijima, Ryota & Le Yaouanq, Yves & Sarver, Todd, 2018. "Behavioral Characterizations of Naivete for Time-Inconsistent Preferences," Rationality and Competition Discussion Paper Series 127, CRC TRR 190 Rationality and Competition.
  • Handle: RePEc:rco:dpaper:127
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    References listed on IDEAS

    as
    1. Stovall, John E., 2018. "Temptation with uncertain normative preference," Theoretical Economics, Econometric Society, vol. 13(1), January.
    2. John E. Stovall, 2010. "Multiple Temptations," Econometrica, Econometric Society, vol. 78(1), pages 349-376, January.
    3. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261.
    4. Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
    5. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February.
    6. Jawwad Noor, 2011. "Temptation and Revealed Preference," Econometrica, Econometric Society, vol. 79(2), pages 601-644, March.
    7. Xavier Giné & Dean Karlan & Jonathan Zinman, 2010. "Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 213-235, October.
    8. Kalyan Chatterjee & R. Vijay Krishna, 2009. "A "Dual Self" Representation for Stochastic Temptation," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 148-167, August.
    9. Ned Augenblick & Muriel Niederle & Charles Sprenger, 2015. "Editor's Choice Working over Time: Dynamic Inconsistency in Real Effort Tasks," The Quarterly Journal of Economics, Oxford University Press, vol. 130(3), pages 1067-1115.
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    Cited by:

    1. Mihm, Maximilian & Ozbek, Kemal, 2019. "On the identification of changing tastes," Games and Economic Behavior, Elsevier, vol. 116(C), pages 203-216.
    2. Toussaert, Séverine, 2018. "Eliciting temptation and self-control through menu choices: a lab experiment," LSE Research Online Documents on Economics 88107, London School of Economics and Political Science, LSE Library.
    3. Mihm, Maximilian & Ozbek, Kemal, 2018. "Mood-driven choices and self-regulation," Journal of Economic Theory, Elsevier, vol. 176(C), pages 727-760.

    More about this item

    Keywords

    naive; sophisticated; time inconsistent; comparative statics;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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