Intentional time inconsistency

Agah R. Turan ()
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Agah R. Turan: Ministry of Development

Theory and Decision, 2019, vol. 86, issue 1, No 3, 64 pages

Abstract: Abstract We propose a theoretical model to explain the usage of time-inconsistent behavior as a strategy to exploit others when reputation and trust have secondary effects on the economic outcome. We consider two agents with time-consistent preferences exploiting common resources. Supposing that an agent is believed to have time-inconsistent preferences with probability p, we analyze whether she uses this misinformation when she has the opportunity to use it. Using the model originally provided by Levhari and Mirman (Bell J Econ 11(1):322–334, 1980), we determine the optimal degree of present bias that the agent would like to have while pretending to have time-inconsistent preferences and we provide the range of present-bias parameter under which deceiving is optimal. Moreover, by allowing the constant relative risk aversion class of utility form, we characterize the distinction between pretending to be naive and sophisticated.

Keywords: Time-inconsistent preferences; Hyperbolic discounting; Dynamic game; Common property resources; Perfect Bayesian equilibrium (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11238-018-9671-y

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