Reference-dependent self-control: Menu effects and behavioral choices

Abhinash Borah and Raghvi Garg

Journal of Economic Behavior & Organization, 2023, vol. 211, issue C, 129-145

Abstract: As is well-known, choices of a decision maker (DM) who attempts self-control in the face of temptation may exhibit menu effects and “non-standard” patterns. Existing models can accommodate some of these patterns but not others; e.g., they can explain self-control undermining menu effects, but not self-control enhancing ones. We introduce a model of self-control with the goal of better understanding and accounting for such effects. The basic idea underlying our model is that the DM experiences a psychological cost if she succumbs to temptation and chooses in a manner that is totally antithetical to her commitment preferences. To mitigate such costs, in any menu, her expression of self-control involves, first, eliminating a subset of alternatives that are worst according to her commitment preferences, with the elimination process being reference-dependent. Then, amongst the remaining alternatives, she chooses the best one according to her temptation preferences. Besides studying menu effects, we characterize the model behaviorally based on a novel axiom called WARP with norms. We also show that the model is well-identified.

Keywords: Self-control; Temptation; Normative elimination; Reference dependence; Menu effects (search for similar items in EconPapers)
JEL-codes: D01 D91 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:211:y:2023:i:c:p:129-145

DOI: 10.1016/j.jebo.2023.04.027

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