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A Dual-Self Model of Impulse Control

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  • David K. Levine
  • Drew Fudenberg

Abstract

We propose that a simple ?dual-self? model gives a unified explanation for several empirical regularities, including the apparent time inconsistency that has motivated models of quasi-hyperbolic discounting and Rabin?s paradox of risk aversion in the large and small. The model also implies that self-control costs imply excess delay, as in the O?Donoghue and Rabin models of quasi-hyperbolic utility, and it explains experimental evidence that increased cognitive load makes temptations harder to resist. The base version of our model is consistent with the Gul-Pesendorfer axioms, but we argue that these axioms must be relaxed to account for the effect of cognitive load. (JEL D11, D81)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.5.1449
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Bibliographic Info

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

Volume (Year): 96 (2006)
Issue (Month): 5 (December)
Pages: 1449-1476

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:5:p:1449-1476

Note: DOI: 10.1257/aer.96.5.1449
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References

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  1. Per Krusell & Burhanettin Kuruşçu & Anthony A. Smith Jr., 2010. "Temptation and Taxation," Econometrica, Econometric Society, vol. 78(6), pages 2063-2084, November.
  2. Matthew Rabin, 2001. "Risk Aversion and Expected Utility Theory: A Calibration Theorem," Levine's Working Paper Archive 7667, David K. Levine.
  3. Ted O'Donoghue & Matthew Rabin, 2001. "Choice And Procrastination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 121-160, February.
  4. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  5. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
  6. W. Pesendorfer & F. Gul, 1999. "Self-Control and the Theory of Consumption," Princeton Economic Theory Papers 99f2, Economics Department, Princeton University.
  7. Drew Fudenberg & David K. Levine, 1996. "The Theory of Learning in Games," Levine's Working Paper Archive 624, David K. Levine.
  8. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
  9. Stefano Della Vigna & Ulrike Malmendier, 2004. "Contract Design and Self-control: Theory and Evidence," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 353-402, May.
  10. Jawwad Noor, 2007. "Temptation, Welfare and Revealed Preference," Boston University - Department of Economics - Working Papers Series WP2007-008, Boston University - Department of Economics.
  11. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self Control, Revealed Preferences and Consumption Choice," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 243-264, April.
  12. Malmendier, Ulrike M. & Della Vigna, Stefano, 2002. "Overestimating Self-Control: Evidence from the Health Club Industry," Research Papers 1880, Stanford University, Graduate School of Business.
  13. Drazen Prelec, 2004. "Decreasing Impatience: A Criterion for Non-stationary Time Preference and "Hyperbolic" Discounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 511-532, October.
  14. H. M. Shefrin & Richard Thaler, 1977. "An Economic Theory of Self-Control," NBER Working Papers 0208, National Bureau of Economic Research, Inc.
  15. Christopher Harris & David Laibson, 2001. "Instantaneous Gratification," Levine's Working Paper Archive 625018000000000267, David K. Levine.
  16. Benhabib, Jess & Bisin, Alberto, 2005. "Modeling internal commitment mechanisms and self-control: A neuroeconomics approach to consumption-saving decisions," Games and Economic Behavior, Elsevier, vol. 52(2), pages 460-492, August.
  17. Shiv, Baba & Fedorikhin, Alexander, 1999. " Heart and Mind in Conflict: The Interplay of Affect and Cognition in Consumer Decision Making," Journal of Consumer Research, University of Chicago Press, vol. 26(3), pages 278-92, December.
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