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Addiction and Present-Biased Preferences

  • O’Donoghue, Ted
  • Rabin, Matthew

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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Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt3v86x53j.

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Date of creation: 01 Feb 2002
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Handle: RePEc:cdl:econwp:qt3v86x53j
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  1. Orphanides, Athanasios & Zervos, David, 1995. "Rational Addiction with Learning and Regret," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 739-58, August.
  2. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-57, July.
  3. Ruqu Wang, 2000. "The Optimal Consumption and the Quitting of Harmful Addictive Goods," Econometric Society World Congress 2000 Contributed Papers 1122, Econometric Society.
  4. 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.
  5. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
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  8. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2003. "Projection Bias in Predicting Future Utility," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1209-1248.
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  10. Ted O'Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 121-160.
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  14. Jonathan Gruber & Botond Koszegi, 2000. "Is Addiction "Rational"? Theory and Evidence," NBER Working Papers 7507, National Bureau of Economic Research, Inc.
  15. Goldman, Steven Marc, 1979. "Intertemporally Inconsistent Preferences and the Rate of Consumption," Econometrica, Econometric Society, vol. 47(3), pages 621-26, May.
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  18. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  19. Juan D. Carrillo & Thomas Mariotti, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 529-544.
  20. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
  21. Fischer, Carolyn, 1999. "Read This Paper Even Later: Procrastination with Time-Inconsistent Preferences," Discussion Papers dp-99-20, Resources For the Future.
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  23. 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.
  24. Ainslie, George, 1991. "Derivation of "Rational" Economic Behavior from Hyperbolic Discount Curves," American Economic Review, American Economic Association, vol. 81(2), pages 334-40, May.
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