Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107133
Authors: 
Kodritsch, Sebastian
Year of Publication: 
2015
Series/Report no.: 
WZB Discussion Paper SP II 2015-201
Abstract: 
I examine the circumstances under which a sophisticated time-inconsistent decisionmaker (i) will not or (ii) need not severely miscoordinate her behavior across time, in the sense of following a course of action which fails to be Pareto-optimal for the sequence of temporal selves of the individual (Laibson [1994] and O'Donoghue and Rabin [1999] provide prominent instances of such miscoordination). Studying the standard solution concept for this case - Strotz-Pollak equilibrium - in general decision problems with perfect information, I establish two results: first, for finite-horizon problems without indifference, essential consistency (Hammond [1976]) is sufficient for choice to be Pareto-optimal. Second, if the decision problem satisfies a certain history-independence property, whenever an equilibrium outcome fails to be Pareto-optimal, it is Pareto-dominated by another equilibrium outcome, leading to an existence result for a Pareto-optimal solution.
Subjects: 
time-inconsistency
multi-selves approach
Strotz-Pollak equilibrium
welfare
Pareto-optimality
JEL: 
C72
D11
D60
D74
D90
Document Type: 
Working Paper

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