Myopia, amnesia, and consistent intertemporal choice (Q801779)

Social scientists often explain observed streams of behavior as the outcome of constrained choice at successive dates, with actors choosing among planned sequences of actions extending into the future. This paper presents four axioms for consistent intertemporal choice in such models. Within this framework, myopia and amnesia are defined to be choice processes in which future feasible actions and past decisions, respectively, play no role in current choice. Each of these modeling strategies is argued to have some plausibility on the basis of bounded rationality considerations. It is shown that an anticipatory process reduces to a behaviorally equivalent myopic process if and only if binary choices are lexically organized. Amnesia, or the absence of endogenous preference formation, is characterized by the condition that binary choices be 'ahistorical'. The paper closes with some remarks on the methodological role of the consistency axioms, and the problems posed by inconsistent choice processes.