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

John Hey and Gianna Lotito

Chapter 11 in Experiments in Economics:Decision Making and Markets, 2018, pp 275-299 from World Scientific Publishing Co. Pte. Ltd.

Abstract: 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.

Keywords: Experimental Economics; Risk; Ambiguity; Markets; Auctions; Bargaining; Econometrics; Methodology (search for similar items in EconPapers)
JEL-codes: C90 (search for similar items in EconPapers)
Date: 2018
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Related works:
Journal Article: Naive, resolute or sophisticated? A study of dynamic decision making (2009)
Working Paper: Naïve, Resolute or Sophisticated? A Study of Dynamic Decision Making (2007)
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