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Myopic, Naive, Resolute or Sophisticated? A study of how people take dynamic decisions

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  • John Hey
  • Luca Panaccione

Abstract

Potentially dynamically-inconsistent individuals create particular problems for economics, as their behaviour depends upon whether and how they attempt to resolve their potential inconsistency. This paper reports on the results of a new experiment designed to help us distinguish between the different types that may exist. We classify people into four types: myopic, naive, resolute and sophisticated. We implement a new and simple experimental design in which subjects are asked to take two sequential decisions (interspersed by a random move by Nature) concerning the allocation of a given sum of money. The resulting data enables us to classify the subjects. We find that the majority are resolute, a significant minority are sophisticated and rather few are naive or myopic.

Suggested Citation

  • John Hey & Luca Panaccione, "undated". "Myopic, Naive, Resolute or Sophisticated? A study of how people take dynamic decisions," Discussion Papers 09/17, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:09/17
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    References listed on IDEAS

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    More about this item

    Keywords

    dynamic inconsistency; sequential choice; myopic; naive; resolute; sophisticated;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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