Dynamic optimization with type indeterminate decision-maker: A theory of multiple-self management

Abstract

We study the implications of quantum type indeterminacy for a single agent's dynamic decision problem. When the agent is aware that his decision today affects the preferences that will be relevant for his decisions tomorow, the dynamic optimization problem translates into a game with multiple selves and provides a suitable framework to address issues of self-control.. The TI-model delivers a theory of self-management in terms of decentralized Bayes-Nash equilibrium among the potential eigentypes(selves). In a numerical example we show how the predictions of the TI-model differ from that of a classical model. In the TI-model choices immediately (without additional structure) reflect self-management concerns. In particular, what may be perceived as a feature of dynamic inconsistency, may instead reflect rational optimization by a type indeterminate agent. © 2011 Springer-Verlag.