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Doing It Now or Later

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  • Ted O'Donoghue
  • Matthew Rabin

Abstract

The authors examine self-control problems--modeled as time-inconsistent, present-biased preferences--in a model where a person must do an activity exactly once. They emphasize two distinctions: do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate--do too soon--immediate-reward activities. Sophistication mitigates procrastination but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1172.

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Date of creation: Dec 1996
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Handle: RePEc:nwu:cmsems:1172

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  1. When will Ronaldo dive? Insights from behavioural economics
    by Ronan Lyons in Ronan Lyons on 2010-06-22 06:00:09
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