Behavioural Characterizations of Naivete for Time-Inconsistent Preferences

David S Ahn, Ryota Iijima, Yves Le Yaouanq () and Todd Sarver

The Review of Economic Studies, 2019, vol. 86, issue 6, 2319-2355

Abstract: We propose non-parametric definitions of absolute and comparative naivete. These definitions leverage ex ante choice of menu to identify predictions of future behaviour and ex post (random) choices from menus to identify actual behaviour. The main advantage of our definitions is their independence from any assumed functional form for the utility function representing behaviour. An individual is sophisticated if she is indifferent ex ante between retaining the option to choose from a menu ex post or committing to her actual distribution of choices from that menu. She is naive if she prefers the flexibility in the menu, reflecting a mistaken belief that she will act more virtuously than she actually will. We propose two definitions of comparative naivete and explore the restrictions implied by our definitions for several prominent models of time inconsistency.

Keywords: Naive; Sophisticated; Time inconsistent; Comparative statics (search for similar items in EconPapers)
JEL-codes: D81 D84 D91 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Behavioural Characterizations of Naivete for Time-Inconsistent Preferences (2019)
Working Paper: Behavioral Characterizations of Naivete for Time-Inconsistent Preferences (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:86:y:2019:i:6:p:2319-2355.

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