IDEAS home Printed from https://ideas.repec.org/p/yor/yorken/99-22.html
   My bibliography  Save this paper

Do People (Want to) Plan?

Author

Listed:
  • John Hey

Abstract

Central to many theoretical accounts of the process by which (rational) people tackle dynamic decision problems is the concept of a plan: a set of conditional decisions as to what would be decided under certain conditions (imposed by Nature). The notion of a plan is clearly central to theories of dynamic decision making in which backward induction and the Principle of Optimality are invoked. To many theorists, the adoption and subsequent implementation of a plan are almost axioms of rational behaviour. These theorists ask two questions: how can dynamic decisions be taken in the absence of a plan; why would anyone want to change the plan once it is embarked upon. Experimental economists have begun to explore the implications of these notions. For example, work by Robin Cubitt and his associates has investigated whether the way a dynamic decision problem is formulated and presented to the subjects has any effect on the decisions taken by the subjects; if the subjects have a plan, and implement it in the sense discussed above, there should be no effect. Cubitt and his associates find some effect. With Massimo Paradiso I have investigated whether subjects have preferences over different formulations and presentations, for example, whether subjects prefer to be forced to pre-commit themselves (to a plan) or whether they prefer the flexibility of not being pre-committed. Of course, if subjects have a plan in the sense discussed above they should be indifferent between all such alternative formulations (of the same choice problem). However, we find they are not. Of course, subjects could behave the same yet have differing preferences; they could, conceivably also have identical preferences but behave differently, but neither of these types of experiments casts direct light on the key question as to whether subjects have plans and implement them. This is the purpose of the new experiments reported in this paper. These experiments were difficult to design because of the difficulty of observing correctly whether a plan exists in the subject’s mind, and particularly because of the difficulty of getting the subject to honestly reveal the existence and nature of a plan. The problem is simple: if the subject is not going to be forced to follow the announced plan, what incentive is there for reporting it honestly? And if the subject is forced to follow the announced plan, then the dynamic choice problem has been transformed into a static (pre-commitment) choice problem - and the very thing that we want to examine has been transformed away. We have an experimental design which overcomes these problems. The paper reports on the results of an experiment carried out by ESSE (Economia Sperimentale al Sud d’Europa) in Bari.

Suggested Citation

  • John Hey, "undated". "Do People (Want to) Plan?," Discussion Papers 99/22, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:99/22
    as

    Download full text from publisher

    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/1999/9922.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Machina, Mark J., 1984. "Temporal risk and the nature of induced preferences," Journal of Economic Theory, Elsevier, vol. 33(2), pages 199-231, August.
    2. Enrica Carbone & John Hey, 2001. "A Test of the Principle of Optimality," Theory and Decision, Springer, vol. 50(3), pages 263-281, May.
    3. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-1668, December.
    4. Epstein, Larry G, 1980. "Decision Making and the Temporal Resolution of Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 269-283, June.
    5. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Kreps, David M. & Porteus, Evan L., 1979. "Temporal von neumann-morgenstern and induced preferences," Journal of Economic Theory, Elsevier, vol. 20(1), pages 81-109, February.
    7. Cubitt, Robin P & Starmer, Chris & Sugden, Robert, 1998. "Dynamic Choice and the Common Ratio Effect: An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 108(450), pages 1362-1380, September.
    8. Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
    9. Cubitt, Robin P, 1996. "Rational Dynamic Choice and Expected Utility Theory," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 1-19, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rodepeter, Ralf & Winter, Joachim, 1999. "Rules of thumb in life-cycle savings models," Sonderforschungsbereich 504 Publications 99-81, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    2. Anna Conte & M. Levati, 2014. "Use of data on planned contributions and stated beliefs in the measurement of social preferences," Theory and Decision, Springer, vol. 76(2), pages 201-223, February.
    3. Theodoros M. Diasakos, 2008. "Complexity and Bounded Rationality in Individual Decision Problems," Carlo Alberto Notebooks 90, Collegio Carlo Alberto.
    4. Maria J. Ruiz Martos, 2017. "Individual Dynamic Choice Behaviour and the Common Consequence Effect," ThE Papers 17/01, Department of Economic Theory and Economic History of the University of Granada..
    5. Pradiptyo, Rimawan & Sahadewo, Gumilang Aryo, 2012. "On The Complexity of Eliminating Fuel Subsidy in Indonesia; A Behavioral Approach," MPRA Paper 40045, University Library of Munich, Germany.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:yor:yorken:99/22. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson). General contact details of provider: http://edirc.repec.org/data/deyoruk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.