Yves Le Yaouanq
Cecilia Garcia-Peñalosa: cecilia.garcia-penalosa[at]univ-amu.fr
This paper studies the consistency between a decision-maker’s preferences over menus in a first period, and stochastic choices inside menus at a later date. The comparison of commitment decisions and subsequent behavior reveals whether the individual correctly anticipates future deviations from normative preferences: a sophisticated individual chooses 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 menu choices can be attributed to the anticipation of decision costs. Finally, it reports the results of an experiment based on the axiomatic framework that documents a high prevalence of (partial) naivete at the individual level.