Naivet� About Temptation and Self-Control: Foundations for Naive Quasi-Hyperbolic Discounting

Davis S. Ahn, Ryota Iijima () and Todd Sarver
Additional contact information
Davis S. Ahn: University of California, Berkeley
Ryota Iijima: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/ryota-iijima

No 2099, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We introduce and characterize a recursive model of dynamic choice that accommodates naivet� about present bias. The model incorporates costly self-control in the sense of Gul and Pesendorfer (2001) to overcome the technical hurdles of the Strotz representation. The important novel condition is an axiom for naivet�. We first introduce appropriate definitions of absolute and comparative naivet� for a simple two-period model, and explore their implications for the costly self-control model. We then extend this definition for infinite-horizon environments, and discuss some of the subtleties involved with the extension. Incorporating the definition of absolute naivet� as an axiom, we characterize a recursive representation of naive quasi-hyperbolic discounting with self-control for an individual who is jointly overoptimistic about her present-bias factor and her ability to resist instant gratification. We study the implications of our proposed comparison of naivet� for the parameters of the recursive representation. Finally, we discuss the obstacles that preclude more general notions of naivet�, and illuminate the impossibility of a definition that simultaneously incorporates both random choice and costly self-control. devices.

Keywords: Naive; Sophisticated; Self-control; Quasi-hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D11 D15 D91 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2017-08
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-mic, nep-neu and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Naivet� About Temptation and Self-Control: Foundations for Naive Quasi-Hyperbolic Discounting (2018)
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