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Addiction and Present-Biased Preferences

Author

Listed:
  • 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.

Suggested Citation

  • O'Donoghue, Ted & Rabin, Matthew, 2002. "Addiction and Present-Biased Preferences," Working Papers 02-10, Cornell University, Center for Analytic Economics.
    • Handle: RePEc:ecl:corcae:02-10
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    References listed on IDEAS

    as
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    More about this item

    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 - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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