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

Author

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  • John Hey
  • Gianna Lotito
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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • John Hey & Gianna Lotito, 2009. "Naive, resolute or sophisticated? A study of dynamic decision making," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 1-25, February.
    • Handle: RePEc:kap:jrisku:v:38:y:2009:i:1:p:1-25
    DOI: 10.1007/s11166-008-9058-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic decision making; Naivety; Sophistication; Resoluteness; Dynamic inconsistencies; D90; D80; C91;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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