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Addiction and Present-Biased Preferences

Author Info

Listed author(s):
  • Ted O'Donoghue

    (Cornell University)

  • Matthew Rabin

    (University of California, Berkeley)

Abstract

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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File URL: http://econwpa.repec.org/eps/game/papers/0303/0303005.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0303005.

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Length: 53 pages
Date of creation: 21 Mar 2003
Handle: RePEc:wpa:wuwpga:0303005
Note: 53 pages, Acrobat .pdf
Contact details of provider: Web page: http://econwpa.repec.org

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Find related papers by JEL classification:
  • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
  • B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
  • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
  • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
  • D60 - Microeconomics - - Welfare Economics - - - General
  • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
  • D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
  • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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  15. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
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  17. Goldbaum, David, 2000. "Life Cycle Consumption of a Harmful and Addictive Good," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 458-469, July.
  18. Fischer, Carolyn, 1999. "Read This Paper Even Later: Procrastination with Time-Inconsistent Preferences," Discussion Papers dp-99-20, Resources For the Future.
  19. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
  20. Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
  21. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 573-597.
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