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Barry Sopher (Department of Economics, Rutgers)

"Intertemporal Planning with Temptation, or Anticipating Your Lazy, Disorganized Self"

We investigate inter-temporal planning problems as a way of gaining understanding of the characteristics of individual decision makers and the choice options presented to them that lead decisions to be optimal or sub-optimal. Key to determining whether a decision is suboptimal is determining whether a decision is objectively a bad decision, but this is not so easy to do as might be thought. A frequent simplifying assumption that is made in studies of this sort is that choice of options that yield lower monetary payments than other available options is suboptimal, but consideration of uncertainty in fulfilling requirements to obtain future payments easily disposes of this notion. For example, if one opts for an option in which one pays zero interest for a year on a purchase, but then fails to pay the item off before high interest charges kick in, this might be considered suboptimal, compared to paying the item off up front, or in some other fashion. But key here is that what makes an action optimal or suboptimal is often contingent on information that is essentially unobservable, specifically, the probability that one will fail to pay the item off in time. In the experiment we will be able to make inferences about whether behaviour was optimal or not, by making inferences about personal characteristics based on the choices one makes, and then observing actual behaviour in executing the chosen option to see if it is consistent with the choice behaviour observed.

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