In economics, dynamic inconsistency, or time inconsistency, describes the situation: A decision-maker's preferences change over time, in such a way that a preference, at one point in time, is inconsistent with a preference at another point in time. It is often easiest to think about preferences over time in this context by thinking of decision-makers as being made up of many different "selves", with each self representing the decision-maker at a different point in time. So, for example, there is my today self, my tomorrow self, my next Tuesday self, my year from now self, etc. The inconsistency will occur when somehow the preferences of some of the selves are not aligned with each other.
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.
Read more about Dynamic Inconsistency: In Game Theory, In Behavioral Economics, Stylized Examples
Famous quotes containing the word dynamic:
“The nearer a conception comes towards finality, the nearer does the dynamic relation, out of which this concept has arisen, draw to a close. To know is to lose.”
—D.H. (David Herbert)