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Addiction and Present-Biased Preferences

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Author Info

  • Ted O'Donoghue

    (Cornell University)

  • Matthew Rabin

    (University 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 self-control 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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File URL: http://128.118.178.162/eps/game/papers/0303/0303005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 0303005.

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Length: 53 pages
Date of creation: 21 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpga:0303005

Note: 53 pages, Acrobat .pdf
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Web page: http://128.118.178.162

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  1. Goldman, Steven Marc, 1979. "Intertemporally Inconsistent Preferences and the Rate of Consumption," Econometrica, Econometric Society, vol. 47(3), pages 621-26, May.
  2. 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.
  3. David I. Laibson, 1996. "Hyperbolic Discount Functions, Undersaving, and Savings Policy," NBER Working Papers 5635, National Bureau of Economic Research, Inc.
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  18. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  19. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
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