A note on the welfare of a sophisticated time-inconsistent decision-maker

Arbeitspapier | Working paper

I examine the circumstances under which a sophisticated time-inconsistent decisionmaker (i) will not or (ii) need not severely miscoordinate her behavior across time, in the sense of following a course of action which fails to be Pareto-optimal for the sequence of temporal selves of the individual (Laibson [1994] and O'Donoghue and Rabin [1999] provide prominent instances of such miscoordination). Studying the standard solution concept for this case -Strotz-Pollak equilibrium- in general decision problems with perfect information, I establish two results: first, for finite-horizon problems without indifference, essential consistency (Hammond [1976]) is sufficient for choice to be Pareto-optimal. Second, if the decision problem satisfies a certain history-independence property, whenever an equilibrium outcome fails to be Pareto-optimal, it is Pareto-dominated by another equilibrium outcome, leading to an existence result for a Pareto-optimal solution. (author's abstract)

Object Details

• Extent: Seite(n): 21
• Language: Englisch
• Notes: Status: Veröffentlichungsversion; begutachtet

References and Relationships

• Bibliographic citation: Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Verhalten auf Märkten (SP II 2015-201)

Classification and Topics

• Subject: Psychologie ; Wirtschaft ; Sozialpsychologie ; Allgemeines, spezielle Theorien und Schulen, Methoden, Entwicklung und Geschichte der Wirtschaftswissenschaften ; Zeit ; Konsistenz ; Gleichgewicht ; Wohlbefinden ; Verhalten ; Entscheidung

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kodritsch, Sebastian
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung gGmbH
• (where): Deutschland, Berlin
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/107133
• Last update: 21.06.2024, 4:27 PM CEST