IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v11y2023i11p2588-d1164363.html
   My bibliography  Save this article

A Markov Decision Process with Awareness and Present Bias in Decision-Making

Author

Listed:
  • Federico Bizzarri

    (Department of Information Engineering and Mathematics, University of Siena, Via Roma, 56, 53100 Siena, Italy)

  • Chiara Mocenni

    (Department of Information Engineering and Mathematics, University of Siena, Via Roma, 56, 53100 Siena, Italy)

  • Silvia Tiezzi

    (Department of Economics and Statistics, University of Siena, Piazza San Francesco, 7/8, 53100 Siena, Italy)

Abstract

We propose a Markov Decision Process Model that blends ideas from Psychological research and Economics to study decision-making in individuals with self-control problems. We have borrowed a dual-process of decision-making with self-awareness from Psychological research, and we introduce present bias in inter-temporal preferences, a phenomenon widely explored in Economics. We allow for both an exogenous and endogenous, state-dependent, present bias in inter-temporal decision-making and explore, by means of numerical simulations, the consequences on well-being emerging from the solution of the model. We show that, over time, self-awareness may mitigate present bias and suboptimal choice behaviour.

Suggested Citation

  • Federico Bizzarri & Chiara Mocenni & Silvia Tiezzi, 2023. "A Markov Decision Process with Awareness and Present Bias in Decision-Making," Mathematics, MDPI, vol. 11(11), pages 1-12, June.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:11:p:2588-:d:1164363
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/11/11/2588/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/11/11/2588/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brocas, Isabelle & Carrillo, Juan D., 2014. "Dual-process theories of decision-making: A selective survey," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 45-54.
    2. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
    3. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 729-758.
    4. Simone Galperti & Bruno Strulovici, 2015. "Anticipations and Endogenous Present Bias," Discussion Papers 1582, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Stephen L. Cheung & Agnieszka Tymula & Xueting Wang, 2022. "Present bias for monetary and dietary rewards," Experimental Economics, Springer;Economic Science Association, vol. 25(4), pages 1202-1233, September.
    6. O’Donoghue, Ted & Rabin, Matthew, 2002. "Addiction and Present-Biased Preferences," Department of Economics, Working Paper Series qt3v86x53j, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    7. Loran F. Nordgren & Ap Dijksterhuis, 2009. "The Devil Is in the Deliberation: Thinking Too Much Reduces Preference Consistency," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 36(1), pages 39-46, June.
    8. Taisuke Imai & Tom A Rutter & Colin F Camerer, 2021. "Meta-Analysis of Present-Bias Estimation using Convex Time Budgets," The Economic Journal, Royal Economic Society, vol. 131(636), pages 1788-1814.
    9. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
    10. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(2), pages 185-199.
    11. Christopher W. Allinson & John Hayes, 1996. "The Cognitive Style Index: A Measure of Intuition‐Analysis For Organizational Research," Journal of Management Studies, Wiley Blackwell, vol. 33(1), pages 119-135, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chuanhao Fan & Jiaxin Wang & Yan Zhu & Hengjie Zhang, 2024. "A Consensus-Based 360 Degree Feedback Evaluation Method with Linguistic Distribution Assessments," Mathematics, MDPI, vol. 12(12), pages 1-20, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ryota Nakamura & Marc Suhrcke & Daniel John Zizzo, 2017. "A triple test for behavioral economics models and public health policy," Theory and Decision, Springer, vol. 83(4), pages 513-533, December.
    2. Xavier Giné & Dean Karlan & Jonathan Zinman, 2010. "Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 213-235, October.
    3. Nagler, Matthew G., 2023. "Focusing as commitment," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 520-534.
    4. López, Rafael, 2015. "Beneficial and Harmful Addictions: Two sides of the same coin," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 84, pages 9-31, September.
    5. Khwaja, Ahmed & Silverman, Dan & Sloan, Frank, 2007. "Time preference, time discounting, and smoking decisions," Journal of Health Economics, Elsevier, vol. 26(5), pages 927-949, September.
    6. Ciccarelli, Carlo & Giamboni, Luigi & Waldmann, Robert, 2007. "Cigarette smoking, pregnancy, forward looking behavior and dynamic inconsistency," MPRA Paper 8878, University Library of Munich, Germany.
    7. Joaquin Gómez-Miñambres & Eric Schniter, 2017. "Emotions and Behavior Regulation in Decision Dilemmas," Games, MDPI, vol. 8(2), pages 1-25, May.
    8. Moreno-Okuno, Alejandro & Aguilera Navarrete, Natividad, 2014. "Distancia Psicológica [Psychological Distance]," MPRA Paper 60745, University Library of Munich, Germany.
    9. Drouhin, Nicolas, 2020. "Non-stationary additive utility and time consistency," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 1-14.
    10. Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
    11. Stephan Meier & Charles Sprenger, 2007. "Impatience and credit behavior: evidence from a field experiment," Working Papers 07-3, Federal Reserve Bank of Boston.
    12. Poutvaara, Panu & Siemers, Lars-H. R., 2008. "Smoking and social interaction," Journal of Health Economics, Elsevier, vol. 27(6), pages 1503-1515, December.
    13. Sophie Massin, 2011. "La notion d'addiction en économie : La théorie du choix rationnel à l'épreuve," Revue d'économie politique, Dalloz, vol. 121(5), pages 713-750.
    14. Lu, Shih En, 2016. "Models of limited self-control: Comparison and implications for bargaining," Economics Letters, Elsevier, vol. 145(C), pages 186-191.
    15. Danzer, Alexander M. & Zeidler, Helen, 2024. "Present Bias in Choices over Food and Money," IZA Discussion Papers 17415, Institute of Labor Economics (IZA).
    16. Marco Casari, 2009. "Pre-commitment and flexibility in a time decision experiment," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 117-141, April.
    17. Ted O'Donoghue & Matthew Rabin, 2001. "Risky Behavior among Youths: Some Issues from Behavioral Economics," NBER Chapters, in: Risky Behavior among Youths: An Economic Analysis, pages 29-68, National Bureau of Economic Research, Inc.
    18. Cheung, Stephen L. & Tymula, Agnieszka & Wang, Xueting, 2021. "Quasi-Hyperbolic Present Bias: A Meta-Analysis," IZA Discussion Papers 14625, Institute of Labor Economics (IZA).
    19. Galizzi, Matteo M. & Miraldo, Marisa & Stavropoulou, Charitini & van der Pol, Marjon, 2016. "Doctor–patient differences in risk and time preferences: A field experiment," Journal of Health Economics, Elsevier, vol. 50(C), pages 171-182.
    20. Alexander M. Danzer & Helen Zeidler, 2024. "Present Bias in Choices over Food and Money," Working Papers 239, Bavarian Graduate Program in Economics (BGPE).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jmathe:v:11:y:2023:i:11:p:2588-:d:1164363. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.