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Doing It Now or Later

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  • Matthew Rabin
  • Ted O'Donoghue

Abstract

The authors examine self-control problems--modeled as time-inconsistent, present-biased preferences--in a model where a person must do an activity exactly once. They emphasize two distinctions: do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate--do too soon--immediate-reward activities. Sophistication mitigates procrastination but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.1.103
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 1 (March)
Pages: 103-124

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:1:p:103-124

Note: DOI: 10.1257/aer.89.1.103
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  1. When will Ronaldo dive? Insights from behavioural economics
    by Ronan Lyons in Ronan Lyons on 2010-06-22 06:00:09
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