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Temptation, Welfare and Revealed Preference

  • Jawwad Noor

    (Boston University)

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.

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File URL: http://128.118.178.162/eps/mic/papers/0509/0509009.pdf
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Paper provided by EconWPA in its series Microeconomics with number 0509009.

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Length: 63 pages
Date of creation: 28 Sep 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0509009
Note: Type of Document - pdf; pages: 63
Contact details of provider: Web page: http://128.118.178.162

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  1. Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
  2. Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
  3. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics.
  4. W. Pesendorfer & F. Gul, 1999. "Self-Control and the Theory of Consumption," Princeton Economic Theory Papers 99f2, Economics Department, Princeton University.
  5. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc.
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  10. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434.
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  13. Casey B. Mulligan, 2002. "Capital, Interest, and Aggregate Intertemporal Substitution," NBER Working Papers 9373, National Bureau of Economic Research, Inc.
  14. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  15. Attanasio, Orazio P & Weber, Guglielmo, 1989. "Intertemporal Substitution, Risk Aversion and the Euler Equation for Consumption," Economic Journal, Royal Economic Society, vol. 99(395), pages 59-73, Supplemen.
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  17. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  18. Peleg, Bezalel & Yaari, Menahem E, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 391-401, July.
  19. Faruk Gul & Wolfgang Pesendorfer, 2007. "Harmful Addiction," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 147-172.
  20. Barro, Robert, 2006. "Rare Disasters and Asset Markets in the Twentieth Century," Scholarly Articles 3208215, Harvard University Department of Economics.
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