Myopia and Inconsistency in Dynamic Utility Maximization.¶
Strotz, R. H. (1955). Myopia and Inconsistency in Dynamic Utility Maximization. The Review of Economic Studies, 23(3), 165-180.
Cited by¶
6 citations across 6 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Commitment Device
- The essential commitment is strategic self-limitation against time-inconsistent preferences: voluntarily shrinking one's own future freedom to make the desired behavior the path of least resistance, a logic Strotz (1955) first formalized in his analysis of how a rational agent who foresees the inconsistency of his future preferences will "precommit" by constraining the actions available to his later self.
This sourceFoundational formalization of dynamic inconsistency: a rational agent who foresees that his future self will not follow his current optimal plan will 'precommit' by constraining his later self's available actions.
- The essential commitment is strategic self-limitation against time-inconsistent preferences: voluntarily shrinking one's own future freedom to make the desired behavior the path of least resistance, a logic Strotz (1955) first formalized in his analysis of how a rational agent who foresees the inconsistency of his future preferences will "precommit" by constraining the actions available to his later self.
- Discounting (Present Value)
- However, empirical evidence shows humans exhibit hyperbolic or quasi-hyperbolic discounting (Strotz 1955
This sourceFirst formal dynamic-inconsistency analysis; distinguishes sophisticated from naive present-biased agents; supports the claim that humans exhibit time-inconsistent (non-exponential) discounting.
- However, empirical evidence shows humans exhibit hyperbolic or quasi-hyperbolic discounting (Strotz 1955
- Preference
- An ordering aggregated across many evaluators raises the social-choice problem and Arrow's (1951) impossibility theorem — a structural sub-case where the aggregation operation itself faces constraints.
This sourceFoundational formalization of dynamic inconsistency: an agent's optimal plan over future consumption is not in general the plan that the agent's later self will choose to follow, generating preference reversals as the decision horizon approaches.
- An ordering aggregated across many evaluators raises the social-choice problem and Arrow's (1951) impossibility theorem — a structural sub-case where the aggregation operation itself faces constraints.
- Temporal Inconsistency and Preference Reversals
- An agent claims preference for X over Y when both are distant (e.g., "I'll exercise tomorrow"), but reverses to Y when the moment arrives ("Actually, I'll rest today").
This sourceFoundational formalization of dynamic inconsistency: an agent's optimal plan over future consumption is not in general the plan that the agent's later self will choose to follow, generating preference reversals as the decision horizon approaches.
- An agent claims preference for X over Y when both are distant (e.g., "I'll exercise tomorrow"), but reverses to Y when the moment arrives ("Actually, I'll rest today").
- Time Preference (Discounting Future)
- The behavioral-economics revision came with the work of Henry Strotz
This sourceFirst formal dynamic-inconsistency analysis; distinguishes sophisticated from naïve present-biased agents.
- The behavioral-economics revision came with the work of Henry Strotz
- Time Value of Money
- Strotz (1955-56)
This sourceFirst formal dynamic-inconsistency analysis; distinguishes sophisticated from naïve present-biased agents.
Supported in partVerified against the publisher's abstract
The work exists as cited — Strotz, 'Myopia and Inconsistency in Dynamic Utility Maximization', Review of Economic Studies 23(3):165–180 — and its title names the topic, but nothing held here states the priority claim.
“Myopia and Inconsistency in Dynamic Utility Maximization, The Review of Economic Studies, Volume 23, Issue 3, 1 January 1955, Pages 165–180”
- Strotz (1955-56)
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