Working paper

Anticipating Preference Reversal"

Yves Le Yaouanq

Abstract

This paper studies the consistency between a decision-maker's choices over menus in a first period and inside menus at a later date. The main result shows that the comparison of commitment decisions and actual subsequent choices reveals whether future taste contingencies are correctly anticipated: a sophisticated individual chooses exactly the right commitment options, whereas a naive decision-maker overlooks some profitable opportunities. The paper provides absolute and comparative measures of naivete and shows under which conditions pessimistic behavior can be attributed to the presence of self-control costs. Finally, I implement an experimental protocol based on the theoretical analysis and find substantial evidence of naivete at the individual level.

Keywords

Self-control; Naivete; Temptation; Stochastic choice; Random Strotz;

JEL codes

  • C91: Laboratory, Individual Behavior
  • D81: Criteria for Decision-Making under Risk and Uncertainty
  • D90: General

Reference

Yves Le Yaouanq, Anticipating Preference Reversal", TSE Working Paper, n. 15-585, 2015-06.

See also

Published in

TSE Working Paper, n. 15-585, 2015-06