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On the benefits of time-inconsistent preferences

Philipp Weinschenk

Journal of Economic Behavior & Organization, 2021, vol. 182, issue C, 185-195

Abstract: Why are time-inconsistent preferences widespread among decision makers? This paper provides a possible explanation by showing that time-inconsistent preferences could be beneficial for decision makers that work together. Time-inconsistent preferences – which are usually blamed for having detrimental effects – can thus be advantageous for the functioning of societies. We further show that decision makers with time-inconsistent preferences are better off if they are naive rather than sophisticated concerning their inconsistency. The results do not depend on the construction of contracts or punishment schemes.

Keywords: Time-inconsistent preferences; Teams; Sophistication; Naiveté (search for similar items in EconPapers)
JEL-codes: D82 D90 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jebo.2020.11.035

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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Handle: RePEc:eee:jeborg:v:182:y:2021:i:c:p:185-195