Individuals’ insight into intrapersonal externalities

Abstract

An intrapersonal externality exists when an individual’s decisions affect the outcomes of her future decisions. It can result in decreasing or increasing average returns to the rate of consumption, as occurs in addiction or exercise. Experimentation using the Harvard Game, which models intrapersonal externalities, has found differences in decision making between drug users and control subjects, leading to the argument that these externalities influence the course of illicit drug use. Nevertheless, it is unclear how participants who behave optimally conceptualise the problem. We report two experiments using a simplified Harvard Game, which tested the differences in contingency knowledge between participants who chose optimally and participants who did not. Those who demonstrated optimal performance exhibited both a pattern of correct responses and systematic errors to questions about the payoff schedules. The pattern suggested that they learned explicit knowledge of the change in reinforcement on a trail-by-trial basis. They did not have, or need, a full knowledge of the historical interaction leading to each payoff. We also found no evidence of choice differences between participants who were given a guaranteed payment and participants who were paid contingent on their performance, but those given a guaranteed payment were able to report more contingency knowledge as the experiment progressed, suggesting that they explored more rather than settling into a routine. Experiment 2 showed that using a fixed inter-trial interval did not change the results.

Keywords

• intrapersonal externalities
• melioration
• decision-making
• contingency knowledge
• incentives