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

John Hey and Luca Panaccione

Discussion Papers from Department of Economics, University of York

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.

Keywords: dynamic inconsistency; sequential choice; myopic; naive; resolute; sophisticated (search for similar items in EconPapers)
JEL-codes: D81 D90 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:09/17

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