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Abstract

Choice may be determined both by a consideration of one?s welfare (normative preference) and by desires (temptation preference). To provide foundations for such a theory, Gul and Pesendorfer [7, 8] adopt a preference over choice problems as a primitive and hypothesize that temptation creates a preference for commit- ment. This paper argues that temptation may in fact create the absence of a preference for commitment, and that the primitive may not be empirically mean- ingful since it requires us to observe behavior in the absence of temptation. An alternative approach to providing foundations is introduced. Motivated by the evidence on preference reversals, it is hypothesized that delayed temptations are easier to resist than immediate temptations. Normative preference is derived via choices between sufficiently delayed alternatives, and temptation preference is in- ferred from discrepancies between normative preference and choice. With a choice correspondence as the primitive, agents who are ?tempted not to commit?are mod- eled. The foundations of the model are used to identify evidence supporting such temptation.

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File URL: http://people.bu.edu/jnoor/research/temptationandrevealedpreference.pdf
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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2006-025.

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Length: 60pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:bos:wpaper:wp2006-025

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Related research

Keywords: Self-Control; Temptation; Commitment; Preference Reversals; Re- vealed Preference.;

Find related papers by JEL classification:

• D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
• D60 - Microeconomics - - Welfare Economics - - - General

References

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1. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Time orientation and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 107-135, January.
   
   • Per Krusell & Burhanettin Kuruscu & Anthony A. Smith, Jr., . "Time Orientation and Asset Prices," GSIA Working Papers 2001-13, Carnegie Mellon University, Tepper School of Business.
2. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Levine's Bibliography 122247000000001061, UCLA Department of Economics.
3. Faruk Gul & Wolfgang Pesendorfer, 2005. "The Revealed Preference Theory of Changing Tastes," Review of Economic Studies, Wiley Blackwell, vol. 72(2), pages 429-448, 04.
4. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434.
5. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
6. Jawwad Noor, 2005. "Commitment and Self-Control," Boston University - Department of Economics - Working Papers Series WP2005-014, Boston University - Department of Economics.
   
   • Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
   • Jawwad Noor, 2005. "Commitment and Self-Control," Microeconomics 0509008, EconWPA.
7. O'Donoghue, Ted & Rabin, Matthew, 1997. "Doing It Now or Later," Department of Economics, Working Paper Series qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
   
   • Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
   • Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
   • Ted O'Donoghue & Matthew Rabin, 1996. "Doing It Now or Later," Discussion Papers 1172, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
8. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
   
   • Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
9. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
   
   • W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
10. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, 01.
    
    • W. Pesendorfer & F. Gul, 1999. "Self-Control and the Theory of Consumption," Princeton Economic Theory Papers 99f2, Economics Department, Princeton University.
11. Faruk Gul & Wolfgang Pesendorfer, 2007. "Harmful Addiction," Review of Economic Studies, Wiley Blackwell, vol. 74(1), pages 147-172, 01.
12. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
13. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics.
14. Peleg, Bezalel & Yaari, Menahem E, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 391-401, July.

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Cited by:

1. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Levine's Bibliography 122247000000001061, UCLA Department of Economics.

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