A Markov Decision Process with Awareness and Present Bias in Decision-Making

Federico Bizzarri, Chiara Mocenni and Silvia Tiezzi ()
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Federico Bizzarri: Department of Information Engineering and Mathematics, University of Siena, Via Roma, 56, 53100 Siena, Italy
Chiara Mocenni: Department of Information Engineering and Mathematics, University of Siena, Via Roma, 56, 53100 Siena, Italy
Silvia Tiezzi: Department of Economics and Statistics, University of Siena, Piazza San Francesco, 7/8, 53100 Siena, Italy

Mathematics, 2023, vol. 11, issue 11, 1-12

Abstract: We propose a Markov Decision Process Model that blends ideas from Psychological research and Economics to study decision-making in individuals with self-control problems. We have borrowed a dual-process of decision-making with self-awareness from Psychological research, and we introduce present bias in inter-temporal preferences, a phenomenon widely explored in Economics. We allow for both an exogenous and endogenous, state-dependent, present bias in inter-temporal decision-making and explore, by means of numerical simulations, the consequences on well-being emerging from the solution of the model. We show that, over time, self-awareness may mitigate present bias and suboptimal choice behaviour.

Keywords: awareness; present bias; decision-making; Markov Decision Process (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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