Know Thyself: Self Awareness and Utility Misprediction in Discounting Models of Intertemporal Choice
This review critically discusses the theoretical models of discounting through a selection of papers. It will focus on the comparison between the two major models, namely discounted utility and hyperbolic discounting. This paper differs from previous surveys in the attention given to the interpretation of models and suggestions for future research. First, it stresses how the economics literature is biased itself, since it considers only present-biased preferences on the basis of not well grounded evidence, while also future-biased preferences are worthwhile of attention to address relevant issues, like compulsive behaviors and work-life unbalance. Second, it makes qualifications on the meaning of self-awareness, distinguishing between cognitive boundaries and beliefs. Third, it suggests future direction of research to address this issue, fundamental for a sound policy analysis, by showing how the two main welfare criteria used in the literature to evaluate welfare of inconsistent individuals (long-run utility and Pareto criterion) have relevant shortcomings. Finally, it proposes a new perspective on misprediction of utility based on time perception
|Date of creation:||18 Dec 2008|
|Contact details of provider:|| Postal: P.le della Vittoria, 15 - 47100 Forlì, Italy|
Phone: +39 0543 62327
Fax: +39 0543 374676
Web page: http://www.aiccon.it/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. A. Pollak, 1968. "Consistent Planning," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 201-208.
- Goldman, Steven Marc, 1979. "Intertemporally Inconsistent Preferences and the Rate of Consumption," Econometrica, Econometric Society, vol. 47(3), pages 621-626, May.
- O'Donoghue, Ted & Rabin, Matthew, 2006.
"Optimal sin taxes,"
Journal of Public Economics,
Elsevier, vol. 90(10-11), pages 1825-1849, November.
- Ted O'Donoghue & Matthew Rabin, 2005. "Optimal Sin Taxes," Levine's Bibliography 784828000000000346, UCLA Department of Economics.
- Ted O'Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 121-160.
- O'Donoghue, Ted & Rabin, Matthew, 2000. "Choice and Procrastination," Department of Economics, Working Paper Series qt5r26k54p, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Ted O' Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," Microeconomics 0012002, EconWPA.
- Ted O' Donoghue and Matthew Rabin., 2000. "Choice and Procrastination," Economics Working Papers E00-281, University of California at Berkeley.
- Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 67-84, January.
- Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
- Tirole, Jean, 2002. "Rational irrationality: Some economics of self-management," European Economic Review, Elsevier, vol. 46(4-5), pages 633-655, May.
- Read, Daniel, 2001. "Is Time-Discounting Hyperbolic or Subadditive?," Journal of Risk and Uncertainty, Springer, vol. 23(1), pages 5-32, July.
- Salanie, Francois & Treich, Nicolas, 2006. "Over-savings and hyperbolic discounting," European Economic Review, Elsevier, vol. 50(6), pages 1557-1570, August.
- Ted O'Donoghue & Matthew Rabin, 2003. "Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes," American Economic Review, American Economic Association, vol. 93(2), pages 186-191, May.
- Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1261-1303.
- Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
- David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
- Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
- Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ris:aiccon:2008_057. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paolo Venturi)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.