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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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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
Date of revision:
Handle: RePEc:ecl:corcae:02-10
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