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Addiction and Present-Biased Preferences

  • Ted O'Donoghue

    (Cornell University)

  • Matthew Rabin

    (University 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 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
Date of revision:
Handle: RePEc:wpa:wuwpga:0303005
Note: 53 pages, Acrobat .pdf
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Wang Ruqu, 2007. "The Optimal Consumption and the Quitting of Harmful Addictive Goods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-38, February.
  2. Goldbaum, David, 2000. "Life Cycle Consumption of a Harmful and Addictive Good," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 458-69, July.
  3. Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
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  9. Loewenstein, George & O'Donoghue, Ted & Rabin, Matthew, 2000. "Projection Bias in Predicting Future Utility," Department of Economics, Working Paper Series qt5qh6142m, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  20. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
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