Behavioral Characterizations of Naivet� for Time-Inconsistent Preferences

Davis S. Ahn, Ryota Iijima (), Yves Le Yaouanq () and Todd Sarver
Additional contact information
Davis S. Ahn: University of California, Berkeley
Ryota Iijima: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/ryota-iijima

No 2074, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We propose nonparametric definitions of absolute and comparative naivete. These definitions leverage ex-ante choice of menu to identify predictions of future behavior and ex-post (random) choices from menus to identify actual behavior. The main advantage of our definitions is their independence from any assumed functional form for the utility function representing behavior. An individual is sophisticated if she is indifferent between choosing from a menu ex post or committing to the actual distribution of choices from that menu ex ante. 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. Finally, we discuss the implications of general naivete for welfare and the design of commitment devices.

Keywords: Naive; Sophisticated; Time inconsistent; Comparative statics (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2017-02
New Economics Papers: this item is included in nep-evo and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Behavioral Characterizations of Naivet� for Time-Inconsistent Preferences (2018)
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