Thinking Ahead: The Decision Problem

48 Pages Posted: 22 Jan 2006 Last revised: 26 Dec 2022

See all articles by Patrick Bolton

Patrick Bolton

Imperial College London; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Antoine Faure-Grimaud

London School of Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 2005

Abstract

We propose a model of bounded rationality based on time-costs of deliberating current and future decisions. We model an individual decision maker's thinking process as a thought-experiment that takes time and let the decision maker "think ahead" about future decision problems in yet unrealized states of nature. By formulating an intertemporal, state-contingent, planning problem, which may involve costly deliberation in every state of nature, and by letting the decision-maker deliberate ahead of the realization of a state, we attempt to capture the basic idea that individuals generally do not think through a complete action-plan. Instead, individuals prioritize their thinking and leave deliberations on less important decisions to the time or event when they arise.

Suggested Citation

Bolton, Patrick and Faure-Grimaud, Antoine, Thinking Ahead: The Decision Problem (December 2005). NBER Working Paper No. w11867, Available at SSRN: https://ssrn.com/abstract=872723

Patrick Bolton (Contact Author)

Imperial College London ( email )

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Antoine Faure-Grimaud

London School of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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