IDEAS home Printed from https://ideas.repec.org/p/bos/wpaper/wp2006-025.html
   My bibliography  Save this paper

Temptation, Welfare and Revealed Preference

Author

Listed:
  • Jawwad Noor

    () (Department of Economics, Boston University)

Abstract

Choice may be determined both by a consideration of one?s welfare (normative preference) and by desires (temptation preference). To provide foundations for such a theory, Gul and Pesendorfer [7, 8] adopt a preference over choice problems as a primitive and hypothesize that temptation creates a preference for commit- ment. This paper argues that temptation may in fact create the absence of a preference for commitment, and that the primitive may not be empirically mean- ingful since it requires us to observe behavior in the absence of temptation. An alternative approach to providing foundations is introduced. Motivated by the evidence on preference reversals, it is hypothesized that delayed temptations are easier to resist than immediate temptations. Normative preference is derived via choices between sufficiently delayed alternatives, and temptation preference is in- ferred from discrepancies between normative preference and choice. With a choice correspondence as the primitive, agents who are ?tempted not to commit?are mod- eled. The foundations of the model are used to identify evidence supporting such temptation.

Suggested Citation

  • Jawwad Noor, 2006. "Temptation, Welfare and Revealed Preference," Boston University - Department of Economics - Working Papers Series WP2006-025, Boston University - Department of Economics.
  • Handle: RePEc:bos:wpaper:wp2006-025
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc.
    2. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Time orientation and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 107-135, January.
    3. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics.
    4. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
    5. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434-434.
    6. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    7. Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
    8. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    9. Guvenen, Fatih, 2006. "Reconciling conflicting evidence on the elasticity of intertemporal substitution: A macroeconomic perspective," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1451-1472, October.
    10. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
    11. R. H. Strotz, 1955. "Myopia and Inconsistency in Dynamic Utility Maximization," Review of Economic Studies, Oxford University Press, vol. 23(3), pages 165-180.
    12. Faruk Gul & Wolfgang Pesendorfer, 2007. "Harmful Addiction," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 147-172.
    13. Robert J. Barro, 2006. "Rare Disasters and Asset Markets in the Twentieth Century," The Quarterly Journal of Economics, Oxford University Press, vol. 121(3), pages 823-866.
    14. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
    15. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-969, July.
    16. Casey B. Mulligan, 2002. "Capital, Interest, and Aggregate Intertemporal Substitution," NBER Working Papers 9373, National Bureau of Economic Research, Inc.
    17. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, January.
    18. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    19. Bezalel Peleg & Menahem E. Yaari, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 391-401.
    20. Ravi Bansal & Amir Yaron, 2004. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," Journal of Finance, American Finance Association, vol. 59(4), pages 1481-1509, August.
    21. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    22. Attanasio, Orazio P & Weber, Guglielmo, 1989. "Intertemporal Substitution, Risk Aversion and the Euler Equation for Consumption," Economic Journal, Royal Economic Society, vol. 99(395), pages 59-73, Supplemen.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics.
    2. Bart Cockx & Corinna Ghirelli & Bruno Van der Linden, 2013. "Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis," CESifo Working Paper Series 4187, CESifo Group Munich.
    3. B. Douglas Bernheim, 2010. "Behavioral welfare economics," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(2), pages 123-151, June.
    4. Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
    5. Epstein, Larry G. & Noor, Jawwad & Sandroni, Alvaro, 2008. "Non-Bayesian updating: A theoretical framework," Theoretical Economics, Econometric Society, vol. 3(2), June.
    6. Larry Epstein & Igor Kopylov, 2006. "Cognitive Dissonance and Choice," RCER Working Papers 525, University of Rochester - Center for Economic Research (RCER).
    7. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
    8. David K. Levine & Drew Fudenberg, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, vol. 96(5), pages 1449-1476, December.
    9. André Lapied & Thomas Rongiconi, 2013. "Ambiguity as a Source of Temptation: Modeling Unstable Beliefs," AMSE Working Papers 1316, Aix-Marseille School of Economics, Marseille, France.
    10. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2009. "Temptation-Driven Preferences," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 937-971.
    11. Orlando Gomes, 2011. "The hierarchy of human needs and their social valuation," International Journal of Social Economics, Emerald Group Publishing, vol. 38(3), pages 237-259, February.
    12. Perron, Pierre & Yabu, Tomoyoshi, 2009. "Estimating deterministic trends with an integrated or stationary noise component," Journal of Econometrics, Elsevier, vol. 151(1), pages 56-69, July.
    13. Igor Kopylov & Jawwad Noor, 2009. "Self-Deception and Choice," Levine's Working Paper Archive 814577000000000319, David K. Levine.
    14. Ivan Fernandez-Val, 2005. "Bias Correction in Panel Data Models with Individual Specific Parameters," Boston University - Department of Economics - Working Papers Series WP2005-041, Boston University - Department of Economics.
    15. Klaus Nehring, 2006. "Self-Control through Second-Order Preferences," Levine's Bibliography 321307000000000391, UCLA Department of Economics.
    16. Jawwad Noor, 2005. "Choice and Normative Preference," Boston University - Department of Economics - Working Papers Series WP2005-039, Boston University - Department of Economics.
    17. Wojciech Olszewski, 2011. "A model of consumption-dependent temptation," Theory and Decision, Springer, vol. 70(1), pages 83-93, January.
    18. Barton L. Lipman & Wolfgang Pesendorfer, 2010. "Temptation," Boston University - Department of Economics - Working Papers Series WP2010-021, Boston University - Department of Economics.
    19. Larry G. Epstein & Igor Kopylov, 2007. "An axiomatic model of 'cold feet'," RCER Working Papers 533, University of Rochester - Center for Economic Research (RCER).

    More about this item

    Keywords

    Self-Control; Temptation; Commitment; Preference Reversals; Re- vealed Preference.;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bos:wpaper:wp2006-025. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Program Coordinator). General contact details of provider: http://edirc.repec.org/data/decbuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.