Speaker: Takeshi Murooka, University of Munich

Title: Procrastination and (Non-)Learning Naivete (with Else Christensen)

Abstract: Recent literature has highlighted that people often have systematic misperceptions. Such "naivete" seems prevalent in many economic environments, and the literature has investigated its implications. Most of the literature, however, assumes (either explicitly or implicitly) that people do not learn about their naivete over time. This opens up a natural question: why people do not learn about their naivete?
   Building upon the literature on naivete about self-control by O'Donoghue and Rabin (1999, 2001), we investigate whether and when time-inconsistent people do not learn about their self-control problem. In our basic model, an agent has a task to complete with an immediate cost and a delayed benefit. The agent is partially naive in that she believes with positive probability to be time-consistent, but also attaches positive probability to her true (time-inconsistent) discounting function. The agent can costlessly acquire information which would perfectly reveal her true preferences. Though the task is always worthwhile to do, in that it yields a positive long-run utility, there exists an equilibrium in which the agent will forever procrastinate learning about her type and will never complete the task. Intuitively, learning about her type leads her to undertake the task in the near future, and hence the agent has an incentive to not learn. We then discuss a number of economic implications.

Organizer: Emma von Essen