Goal-setting and self-control

Alice Hsiaw

Journal of Economic Theory, 2013, vol. 148, issue 2, 601-626

Abstract: This paper addresses the role of non-binding goals to attenuate time inconsistency. Present-biased agents have linear reference-dependent preferences and endogenously set a goal that is the reference point. They face an infinite horizon, optimal stopping problem in continuous time. When there is sufficient commitment to expectation-based goals, goal-setting attenuates the present-biased agentʼs tendency to stop too early, and may even lead an agent to wait longer than the first-best. In particular, reference dependence is strictly worse for a time-consistent agent. Notably, none of the effects of goal-setting require loss aversion.

Keywords: Goal-setting; Reference dependence; Self-control; Quasi-hyperbolic discounting; Optimal stopping (search for similar items in EconPapers)
JEL-codes: D03 D14 D81 D91 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (94)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:148:y:2013:i:2:p:601-626

DOI: 10.1016/j.jet.2012.08.001

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