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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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