A naif cannot solve the inter-temporal problem recursively because
A) A naif does not realize there will be future time periods.
B) A naif is unable to predict how their future plans are connected to their current plans.
C) A naif does not know his risk preferences in the future.
D) A naïf does not know his loss aversion in the future.

Question

Quizplus · Accepted Answer

A naif, in the context of behavioral economics, typically understands there will be future time periods but may lack the foresight or understanding of how current decisions are interconnected with future outcomes. This inability to predict how future plans are connected to current plans impedes solving inter-temporal problems recursively, which requires anticipating and planning for future consequences based on present actions. Choices A, C, and D describe issues that might affect decision-making but do not directly address the core issue of understanding the linkage between current and future plans as described in B.

A Naif Cannot Solve the Inter-Temporal Problem Recursively Because