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Goal-setting and self-control

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  • Hsiaw, Alice

Abstract

This paper addresses the role of non-binding goals to attenuate time inconsistency. Present-biased agents have linear reference-dependent preferences and endogenously set a goal that is the reference point. They face an infinite horizon, optimal stopping problem in continuous time. When there is sufficient commitment to expectation-based goals, goal-setting attenuates the present-biased agentʼs tendency to stop too early, and may even lead an agent to wait longer than the first-best. In particular, reference dependence is strictly worse for a time-consistent agent. Notably, none of the effects of goal-setting require loss aversion.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 148 (2013)
Issue (Month): 2 ()
Pages: 601-626

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Handle: RePEc:eee:jetheo:v:148:y:2013:i:2:p:601-626

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Goal-setting; Reference dependence; Self-control; Quasi-hyperbolic discounting; Optimal stopping;

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References

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Cited by:
  1. Alexander K. Koch, & Julia Nafziger & Anton Suvorov & Jeroen van de Ven, 2012. "Self-Rewards and Personal Motivation," Economics Working Papers 2012-14, School of Economics and Management, University of Aarhus.
  2. Holger Stichnoth, 2013. "Reference standards for income comparisons: evidence from immigrants' return visits," Economics Bulletin, AccessEcon, vol. 33(4), pages 2707-2717.

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