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Addiction and Present-Biased Preferences

  • O'Donoghue, Ted

    (Cornell U)

  • Rabin, Matthew

    (U of California, Berkeley)

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 selfcontrol 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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File URL: https://cae.economics.cornell.edu/Addicts.pdf
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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 02-10.

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Date of creation: Jul 2002
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Handle: RePEc:ecl:corcae:02-10
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  1. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
  2. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, EconWPA.
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  4. 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.
  5. 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.
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  19. Fischer, Carolyn, 1999. "Read This Paper Even Later: Procrastination with Time-Inconsistent Preferences," Discussion Papers dp-99-20, Resources For the Future.
  20. 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.
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