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Costly Self Control and Random Self Indulgence

  • Barton L. Lipman

    ()

    (Department of Economics, Boston University.)

  • Eddie Dekel

    ()

    (Economics Dept., Northwestern University, and School of Economics, Tel Aviv University)

We study the random Strotz model, a version of the Strotz (1955) model with uncer- tainty about the nature of the temptation that will strike. We show that the random Strotz representation is unique and characterize a comparative notion of \more temp- tation averse." Also, we demonstrate an unexpected connection between the random Strotz model and a generalization of the Gul{Pesendorfer (GP) (2001) model of temp- tation which allows for the temptation to be uncertain and which we call random GP. In particular, a preference over menus has a random GP representation i it also has a representation via a random Strotz model with suciently smooth uncertainty about the intensity of temptation. We also show that choices of menus combined with choices from menus can distinguish the random GP and random Strotz models.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2010-020.

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Length: 36 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:bos:wpaper:wp2010-020
Contact details of provider: Postal: 270 Bay State Road, Boston, MA 02215
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Web page: http://www.bu.edu/econ/

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  1. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  2. Thibault Gajdos & Takashi Hayashi & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2008. "Attitude toward imprecise information," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00451982, HAL.
  3. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  4. Todd Sarver, 2008. "Anticipating Regret: Why Fewer Options May Be Better," Econometrica, Econometric Society, vol. 76(2), pages 263-305, 03.
  5. repec:bla:restud:v:73:y:2006:i:3:p:689-714 is not listed on IDEAS
  6. Higashi, Youichiro & Hyogo, Kazuya & Takeoka, Norio, 2009. "Subjective random discounting and intertemporal choice," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1015-1053, May.
  7. Eliaz, Kfir & Spiegler, Ran, 2004. "Contracting with Diversely Naive Agents," CEPR Discussion Papers 4573, C.E.P.R. Discussion Papers.
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