Regular Consistent Preferences

19 Pages Posted: 27 Jun 2018

See all articles by Maximilian Mihm

Maximilian Mihm

New York University (NYU) - Abu Dhabi

Kemal Ozbek

University of St Andrews, School of Economics & Finance

Date Written: June 13, 2018

Abstract

In a dynamic choice environment, an agent's tastes may change over time, leading to a conflict between plans made today and choices made in the future. In response, a consistent planner restricts herself to plans that she will actually follow, by anticipating today how she will rank continuation plans in the future. Since the agent's expected future rankings often play an important role in policy analysis, they need to be elicited from observable choices. In this paper, we provide a method to elicit expected future rankings by considering the agent's preferences today over dynamic decision problems. Our identification strategy exploits that, in many applications of the consistent planning model, future rankings are monotone with respect to a partial order, which provides an unambiguous ranking of some alternatives. Our results are developed in a general framework, and can therefore be used to elicit expected future rankings in many applications of the consistent planning model. To illustrate our findings, we consider a dynamic consumption problem with quasi-hyperbolic discounting, and show how the agent's expectations about her present-bias in the future can be elicited from simple choice experiments today.

Keywords: changing tastes, consistent planning, dynamic choice, hyperbolic discounting, partial order

JEL Classification: D11

Suggested Citation

Mihm, Maximilian and Ozbek, Kemal, Regular Consistent Preferences (June 13, 2018). Available at SSRN: https://ssrn.com/abstract=3195371 or http://dx.doi.org/10.2139/ssrn.3195371

Maximilian Mihm

New York University (NYU) - Abu Dhabi ( email )

Abu Dhabi
United Arab Emirates

Kemal Ozbek (Contact Author)

University of St Andrews, School of Economics & Finance ( email )

Castlecliffe, The Scores
St Andrews, Fife KY16 9AR
United Kingdom

HOME PAGE: http://https://sites.google.com/a/cornell.edu/kemal-ozbek/home

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