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A Dual-Self Model of Impulse Control

  • David K. Levine
  • Drew Fudenberg

We propose that a simple ?dual-self? model gives a unified explanation for several empirical regularities, including the apparent time inconsistency that has motivated models of quasi-hyperbolic discounting and Rabin?s paradox of risk aversion in the large and small. The model also implies that self-control costs imply excess delay, as in the O?Donoghue and Rabin models of quasi-hyperbolic utility, and it explains experimental evidence that increased cognitive load makes temptations harder to resist. The base version of our model is consistent with the Gul-Pesendorfer axioms, but we argue that these axioms must be relaxed to account for the effect of cognitive load. (JEL D11, D81)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 5 (December)
Pages: 1449-1476

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:5:p:1449-1476
Note: DOI: 10.1257/aer.96.5.1449
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  1. Drazen Prelec, 2004. "Decreasing Impatience: A Criterion for Non-stationary Time Preference and "Hyperbolic" Discounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 511-532, October.
  2. Stefano Della Vigna & Ulrike Malmendier, 2004. "Contract Design and Self-control: Theory and Evidence," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 353-402, May.
  3. Faruk Gul & Wolfgang Pesendorfer, 2003. "Self-control, revealed preference and consumption choice," Levine's Working Paper Archive 506439000000000362, David K. Levine.
  4. Jawwad Noor, 2006. "Temptation, Welfare and Revealed Preference," Boston University - Department of Economics - Working Papers Series WP2006-025, Boston University - Department of Economics.
  5. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
  6. Junjian Miao, 2005. "Option Exercise with Temptation," Boston University - Department of Economics - Working Papers Series WP2005-007, Boston University - Department of Economics.
  7. Drew Fudenberg & David K. Levine, 1996. "The Theory of Learning in Games," Levine's Working Paper Archive 624, David K. Levine.
  8. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
  9. Shiv, Baba & Fedorikhin, Alexander, 1999. " Heart and Mind in Conflict: The Interplay of Affect and Cognition in Consumer Decision Making," Journal of Consumer Research, University of Chicago Press, vol. 26(3), pages 278-92, December.
  10. Malmendier, Ulrike M. & Della Vigna, Stefano, 2002. "Overestimating Self-Control: Evidence from the Health Club Industry," Research Papers 1880, Stanford University, Graduate School of Business.
  11. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
  12. Benhabib, Jess & Bisin, Alberto, 2005. "Modeling internal commitment mechanisms and self-control: A neuroeconomics approach to consumption-saving decisions," Games and Economic Behavior, Elsevier, vol. 52(2), pages 460-492, August.
  13. Dekel, Eddie & Lipman, Barton L & Rustichini, Aldo, 2001. "Representing Preferences with a Unique Subjective State Space," Econometrica, Econometric Society, vol. 69(4), pages 891-934, July.
  14. Ted O' Donoghue and Matthew Rabin., 2000. "Choice and Procrastination," Economics Working Papers E00-281, University of California at Berkeley.
  15. H. M. Shefrin & Richard Thaler, 1977. "An Economic Theory of Self-Control," NBER Working Papers 0208, National Bureau of Economic Research, Inc.
  16. W. Pesendorfer & F. Gul, 1999. "Self-Control and the Theory of Consumption," Princeton Economic Theory Papers 99f2, Economics Department, Princeton University.
  17. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  18. Per Krusell & Burhanettin Kuruşçu & Anthony A. Smith Jr., 2010. "Temptation and Taxation," Econometrica, Econometric Society, vol. 78(6), pages 2063-2084, November.
  19. Laibson, David I. & Harris, Christopher, 2012. "Instantaneous Gratification," Scholarly Articles 9918802, Harvard University Department of Economics.
  20. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
  21. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  22. David Laibson, 2001. "A Cue-Theory Of Consumption," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 81-119, February.
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