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Articles - Holt - Dellavigna

Q: What are the types of decision makers?

Time-consistent sophisticated fully naive partially naive

Q: Describe the time consistent decision maker

The behaviour of this type of decision-makers is described by the standard model. This corresponds to ̂

Q: Describe the fully naive decision maker

decision-makers who have intertemporal preferences that are not time consistent, but who erroneously think they have time-consistent preferences. This corresponds to

Q: What does DellaVigna expect with respect to the relationship between Psychology and Economics (i.e. Behavioural Economics) on the one hand and mainstream economics on the other hand?

) DellaVigna expects that the deviations from the standard model, as documented by Psychology and Economics (i.e. Behavioural Economics), will be increasingly incorporated into mainstream economics.

Q: If consumers have nonstandard preferences and beliefs, why should one expect firms, employers, financial operators, and politicians to not have them?

Experience is a key difference. Unlike individual consumers, firms can specialize, hire consultants, and obtain feedback from large data sets and capital markets. Firms are also subject to competition. Compared to consumers, therefore, firms are less likely to be affected by biases and we expect them to be close to profit maximization. (DellaVigna p.361)

7 important questions on Articles - Holt - Dellavigna

Describe the parameter β ≤ 1

capturing the self-control problems. For β < 1, the discounting between the present and the future is higher than between any future time periods, capturing the main finding of the experiments

What are the types of decision makers?

Time-consistent
sophisticated
fully naive
partially naive

Describe the time consistent decision maker

The behaviour of this type of decision-makers is described by the standard model. This corresponds to ̂

Describe the fully naive decision maker

decision-makers who have intertemporal preferences that are not time consistent, but who erroneously think they have time-consistent preferences. This corresponds to

What follows from the excpected vs actual consumption and investment?

(i) 1 –

What does DellaVigna expect with respect to the relationship between Psychology and Economics (i.e. Behavioural Economics) on the one hand and mainstream economics on the other hand?

) DellaVigna expects that the deviations from the standard model, as documented by Psychology and Economics (i.e. Behavioural Economics), will be increasingly incorporated into mainstream economics.

If consumers have nonstandard preferences and beliefs, why should one expect firms, employers, financial operators, and politicians to not have them?

Experience is a key difference. Unlike individual consumers, firms can specialize, hire consultants, and obtain feedback from large data sets and capital markets. Firms are also subject to competition. Compared to consumers, therefore, firms are less likely to be affected by biases and we expect them to be close to profit maximization. (DellaVigna p.361)