Addiction and Present-Biased Preferences

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Addiction and Present-Biased Preferences

Author Info

O'Donoghue, Ted (Cornell U)
Rabin, Matthew (U of California, Berkeley)

Abstract

We investigate the role that self-control problems--modeled as time-inconsistent, present-biased preferences--and a person's awareness of those problems might play in leading people to develop and maintain harmful addictions. Present-biased preferences create a tendency to over-consume addictive products, and awareness of future selfcontrol problems can mitigate or exacerbate this over-consumption, depending on the environment. Our central concern is the welfare consequences of this over-consumption. Our analysis suggests that for realistic environments self-control problems are a plausible source of severely harmful addictions only in conjunction with some unawareness of future self-control problems.

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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 02-10.

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Date of creation: Jul 2002
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Handle: RePEc:ecl:corcae:02-10

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Find related papers by JEL classification:
A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D60 - Microeconomics - - Welfare Economics - - - General
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

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Teck H. Ho & Noah Lim & Colin Camerer, 2005. "Modeling the Psychology of Consumer and Firm Behavior with Behavioral Economics," Levine's Bibliography 784828000000000476, UCLA Department of Economics. [Downloadable!]
Carlo Ciccarelli & Luigi Giamboni & Robert J. Waldmann, 2008. "Cigarette Smoking, Pregnancy, Forward Looking Behavior and Dynamic Inconsistency," CEIS Research Paper 132, Tor Vergata University, CEIS, revised 14 Nov 2008. [Downloadable!]
Other versions:
- Ciccarelli, Carlo & Giamboni, Luigi & Waldmann, Robert, 2007. "Cigarette smoking, pregnancy, forward looking behavior and dynamic inconsistency," MPRA Paper 8878, University Library of Munich, Germany. [Downloadable!]
Trenton G. Smith & Attila Tasnádi, 2005. "A Theory of Natural Addiction," Microeconomics 0503006, EconWPA. [Downloadable!]
Other versions:
- Smith, Trenton G. & Tasnadi, Attila, 2005. "A Theory of Natural Addiction," 2005 Annual meeting, July 24-27, Providence, RI 19195, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
- Smith, Trenton G. & Tasnadi, Attila, 2007. "A theory of natural addiction," Games and Economic Behavior, Elsevier, vol. 59(2), pages 316-344, May. [Downloadable!] (restricted)

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