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- Title
Pató Pál úr modellezése.
- Authors
Habis, Helga; Perge, Laura
- Abstract
Many people sit on their hands like the politician in a satirical 1847 poem by Sándor Petőfi, but Homo economicus is rational. This study describes how irrationality, in terms of classical economic theory, can be modelled by agents' non-standard time preferences. It shows how agents who follow self-interest and maximize utility after time has passed may in the interval change their minds. This is also referred to as time inconsistency in decision-making. A naive decision-maker is introduced: such agents re-optimize in every period, which may bring about procrastination. On the alternative side, the authors describe sophisticated decision-makers who realize the possibilities for procrastination and the consequences of doing so, and try to avoid such behaviour, for instance by finishing way before the deadline. It is shown that both behavioural paths can be modelled by incorporating the same hyperbolic discounting formula, although the naive only proceed in a forward-thinking way, while the sophisticated apply a kind of reverse induction.
- Publication
Economic Review / Kozgazdasagi Szemle, 2018, Vol 65, p619
- ISSN
0023-4346
- Publication type
Article
- DOI
10.18414/KSZ.2018.6.619