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Temptation, Welfare and Revealed Preference

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  • Jawwad Noor

    (Boston University)

Abstract

Choice may be determined both by a consideration of one's welfare (normative preference) and by desires (temptation preference). To provide foundations for such a theory, Gul and Pesendorfer (2001, 2004) adopt a preference over choice problems as a primitive and hypothesize that temptation creates a preference for commitment. This paper argues that temptation may in fact create the absence of a preference for commitment, and that the primitive may not be empirically meaningful since it requires us to observe behavior in the absence of temptation. An alternative approach to providing foundations is introduced. Motivated by the evidence on preference reversals, it is hypothesized that delayed temptations are easier to resist than immediate temptations. Normative preference is derived via choices between sufficiently delayed alternatives, and temptation preference is inferred from discrepancies between normative preference and choice. With a choice correspondence as the primitive, agents who are `tempted not to commit' are modeled. The foundations of the model are used to identify evidence supporting such temptation.

Suggested Citation

  • Jawwad Noor, 2005. "Temptation, Welfare and Revealed Preference," Microeconomics 0509009, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpmi:0509009
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David K. Levine & Drew Fudenberg, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, vol. 96(5), pages 1449-1476, December.
    2. Igor Kopylov & Jawwad Noor, 2009. "Self-Deception and Choice," Levine's Working Paper Archive 814577000000000319, David K. Levine.
    3. Bart COCKX & Corinna GHIRELLI & Bruno VAN DER LINDEN, 2013. "Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. Ivan Fernandez-Val, 2005. "Bias Correction in Panel Data Models with Individual Specific Parameters," Boston University - Department of Economics - Working Papers Series WP2005-041, Boston University - Department of Economics.
    5. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2009. "Temptation-Driven Preferences," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 937-971.
    6. Perron, Pierre & Yabu, Tomoyoshi, 2009. "Estimating deterministic trends with an integrated or stationary noise component," Journal of Econometrics, Elsevier, vol. 151(1), pages 56-69, July.
    7. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics.
    8. Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
    9. Yusufcan Masatlioglu & Daisuke Nakajima & Erkut Y. Ozbay, 2012. "Revealed Attention," American Economic Review, American Economic Association, vol. 102(5), pages 2183-2205, August.
    10. André Lapied & Thomas Rongiconi, 2013. "Ambiguity as a Source of Temptation: Modeling Unstable Beliefs," AMSE Working Papers 1316, Aix-Marseille School of Economics, Marseille, France.
    11. B. Douglas Bernheim, 2010. "Behavioral welfare economics," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(2), pages 123-151, June.
    12. Epstein, Larry G. & Noor, Jawwad & Sandroni, Alvaro, 2008. "Non-Bayesian updating: A theoretical framework," Theoretical Economics, Econometric Society, vol. 3(2), June.
    13. Wojciech Olszewski, 2011. "A model of consumption-dependent temptation," Theory and Decision, Springer, vol. 70(1), pages 83-93, January.
    14. Klaus Nehring, 2006. "Self-Control through Second-Order Preferences," Levine's Bibliography 321307000000000391, UCLA Department of Economics.
    15. Jawwad Noor, 2005. "Choice and Normative Preference," Boston University - Department of Economics - Working Papers Series WP2005-039, Boston University - Department of Economics.
    16. Barton L. Lipman & Wolfgang Pesendorfer, 2010. "Temptation," Boston University - Department of Economics - Working Papers Series WP2010-021, Boston University - Department of Economics.
    17. Larry G. Epstein & Igor Kopylov, 2007. "An axiomatic model of 'cold feet'," RCER Working Papers 533, University of Rochester - Center for Economic Research (RCER).
    18. Larry Epstein & Igor Kopylov, 2006. "Cognitive Dissonance and Choice," RCER Working Papers 525, University of Rochester - Center for Economic Research (RCER).
    19. Orlando Gomes, 2011. "The hierarchy of human needs and their social valuation," International Journal of Social Economics, Emerald Group Publishing, vol. 38(3), pages 237-259, February.

    More about this item

    Keywords

    Self-Control; Temptation; Commitment; Preference Reversals; Revealed Preference;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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