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Mood-driven choices and self-regulation

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  • Mihm, Maximilian
  • Ozbek, Kemal

Abstract

We model a decision maker who can exert costly effort to regulate herself, thereby reducing internal conflicts between her normative objectives and mood-driven choices. We provide an axiomatic characterization of the model, and show how costs of self-regulation can be elicited and compared across individuals. In a consumption-saving problem we show that self-regulation can generate unintended income effects, which have important implications for public policies on saving behavior. We also provide several examples to illustrate how self-regulation can rationalize many well-known choice anomalies. These behavioral implications follow from a key feature of the model that self-regulation decisions can respond to changes in incentives.

Suggested Citation

  • Mihm, Maximilian & Ozbek, Kemal, 2018. "Mood-driven choices and self-regulation," Journal of Economic Theory, Elsevier, vol. 176(C), pages 727-760.
    • Handle: RePEc:eee:jetheo:v:176:y:2018:i:c:p:727-760
    DOI: 10.1016/j.jet.2018.05.006
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    3. Borah, Abhinash & Garg, Raghvi, 2023. "Reference-dependent self-control: Menu effects and behavioral choices," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 129-145.
    4. Youichiro Higashi & Kazuya Hyogo & Norio Takeoka, 2020. "Costly Subjective Learning," KIER Working Papers 1040, Kyoto University, Institute of Economic Research.
    5. Tang, Rui & Zhang, Mu, 2023. "Motivated naivete," Journal of Economic Theory, Elsevier, vol. 209(C).

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    More about this item

    Keywords

    Choice anomalies; Consumption-saving; Desire for commitment; Internal conflict; Random Strotz; Self-regulation;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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