December 8, 2009

Time-Inconsistency Problem

Today I tweeted about time-inconsistency. A friend later asked me what it is. I googled the term and found the definition from Wikipedia:

In economics, dynamic inconsistency, or time inconsistency, describes a situation where a decision-maker's preferences change over time, such that what is preferred at one point in time is inconsistent with what is preferred at another point in time...
One type of inconsistency is more closely affiliated with game theory, and "dynamic inconsistency" is the more commonly used terminology in this case. Another type of inconsistency is more closely affiliated with behavioral economics, and "time inconsistency" is the more commonly used terminology there.[vague]


Mankiw has a nice article on the game-theory sense. Though I actually used the term in the behavioral economics sense, meaning that I do not want my plan to be screwed up and myself diverted by trivia every now and then, especially during this exam period.

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