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Goal Setting as a Self-Regulation Mechanism

Author Info

Listed author(s):
  • Anton Suvorov

    ()

    (CEFIR, NES)

  • Jeroen van de Ven

Abstract

We develop a theory of self-regulation based on goal setting for an agent with present-biased preferences. Preferences are assumed to be reference-dependent and exhibit loss aversion, as in prospect theory. The reference point is determined endogenously as an optimal self-sustaining goal. The interaction between hyperbolic discounting and loss aversion makes goals a credible and effective instrument for self-regulation. This is an entirely internal commitment device that does not rely on reputation building. We show that in some cases it is optimal to engage in indulgent behavior, and sometimes it is optimal to set seemingly dysfunctional goals. Finally, we derive a condition under which proximal (short term) goals are better than distal (long term) goals. Our results provide an implicit evolutionary rationale for the existence of loss aversion as a means of self-control.

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File URL: http://www.cefir.ru/papers/WP122.pdf
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Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0122.

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Length: 31 pages
Date of creation: Oct 2008
Handle: RePEc:cfr:cefirw:w0122
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Keywords: self-regulation; goals; time inconsistency; loss aversion; indulgence; compulsiveness; proximal and distal;

Find related papers by JEL classification:

  • D00 - Microeconomics - - General - - - General
  • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
  • D90 - Microeconomics - - Intertemporal Choice - - - General

This paper has been announced in the following NEP Reports:

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Cited by:

  1. Koch, Alexander K. & Nafziger, Julia, 2016. "Goals and bracketing under mental accounting," Journal of Economic Theory, Elsevier, vol. 162(C), pages 305-351.
  2. Holger Stichnoth, 2013. "Reference standards for income comparisons: evidence from immigrants' return visits," Economics Bulletin, AccessEcon, vol. 33(4), pages 2707-2717.
  3. Koch, Alexander K. & Nafziger, Julia & Suvorov, Anton & van de Ven, Jeroen, 2014. "Self-rewards and personal motivation," European Economic Review, Elsevier, vol. 68(C), pages 151-167.
  4. Berno Buechel & Lydia Mechtenberg & Julia Petersen, 2014. "Peer Effects and Students’ Self-Control," SFB 649 Discussion Papers SFB649DP2014-024, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Reinstein, David, 2014. "The Economics of the Gift," Economics Discussion Papers 10009, University of Essex, Department of Economics.
  6. Burger, Nicholas & Charness, Gary & Lynham, John, 2011. "Field and online experiments on self-control," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 393-404, March.
  7. Koch, Alexander K. & Nafziger, Julia, 2009. "Motivational Goal Bracketing," IZA Discussion Papers 4471, Institute for the Study of Labor (IZA).
  8. Gómez Miñambres, Joaquín, 2011. "Make it challenging : motivation through goal setting," UC3M Working papers. Economics we1123, Universidad Carlos III de Madrid. Departamento de Economía.
  9. Hsiaw, Alice, 2013. "Goal-setting and self-control," Journal of Economic Theory, Elsevier, vol. 148(2), pages 601-626.
  10. KAYABA, Yutaka, 2016. "How do People Procrastinate to Meet a Deadline?," Discussion paper series HIAS-E-33, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  11. Koch, Alexander K. & Nafziger, Julia, 2011. "Goals and Psychological Accounting," IZA Discussion Papers 5802, Institute for the Study of Labor (IZA).
  12. Buechel, Berno & Mechtenberg, Lydia & Petersen, Julia, 2014. "Peer Effects and Students’ Self-Control," MPRA Paper 53658, University Library of Munich, Germany.
  13. Max van Lent & Michiel Souverijn, 2017. "Goal Setting and Raising the Bar: A Field Experiment," Tinbergen Institute Discussion Papers 17-001/VII, Tinbergen Institute.
  14. repec:esx:essedp:749 is not listed on IDEAS
  15. Alice Hsiaw, 2015. "Goal Bracketing and Self-Control," Working Papers 90, Brandeis University, Department of Economics and International Businesss School.

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