Naive, resolute or sophisticated? A study of dynamic decision making

TY - JOUR

T1 - Naive, resolute or sophisticated? A study of dynamic decision making

AU - Hey, John D.

AU - Lotito, Gianna

PY - 2009/2

Y1 - 2009/2

N2 - Dynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency. Economic theorists have identified three possible responses-to act naively (thus ignoring the dynamic inconsistency), to act resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their inconsistency). We use data from a unique experiment (which observes both decisions and evaluations) in order to distinguish these three possibilities. We find that the majority of subjects are either naive or resolute (with slightly more being naive) but very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.

AB - Dynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency. Economic theorists have identified three possible responses-to act naively (thus ignoring the dynamic inconsistency), to act resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their inconsistency). We use data from a unique experiment (which observes both decisions and evaluations) in order to distinguish these three possibilities. We find that the majority of subjects are either naive or resolute (with slightly more being naive) but very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.

KW - Dynamic decision making

KW - Naivety

KW - Sophistication

KW - Resoluteness

KW - Dynamic inconsistencies

KW - EXPECTED UTILITY

KW - CHOICE

KW - CONSISTENCY

KW - PREFERENCES

KW - UNCERTAINTY

UR - http://www.scopus.com/inward/record.url?scp=58549106393&partnerID=8YFLogxK

U2 - 10.1007/s11166-008-9058-5

DO - 10.1007/s11166-008-9058-5

M3 - Article

SN - 0895-5646

VL - 38

SP - 125

JO - Journal of Risk and Uncertainty

JF - Journal of Risk and Uncertainty

IS - 1

ER -