Temptation-Driven Preferences

Eddie Dekel, Barton Lipman () and Aldo Rustichini

No 275695, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: “My own behavior baffles me. For I find myself not doing what I really want to do but doing what I really loathe.” Saint Paul What behavior can be explained using the hypothesis that the agent faces temptation but is otherwise a “standard rational agent”? In earlier work, Gul–Pesendorfer [2001] use a set betweenness axiom to restrict the set of preferences considered by Dekel, Lipman, and Rustichini [2001] to those explainable via temptation. We argue that set betweenness rules out plausible and interesting forms of temptation including some which may be important in applications. We propose a pair of alternative axioms called DFC, desire for commitment, and AIC, approximate improvements are chosen. DFC characterizes temptation as situations where given any set of alternatives, the agent prefers committing herself to some particular item from the set rather than leaving herself the flexibility of choosing later. AIC is based on the idea that if adding an option to a menu improves the menu, it is because that option is chosen under some circumstances. From this interpretation, the axiom concludes that if an improvement is worse (as a commitment) than some commitment from the menu, then the best commitment from the menu is strictly preferred to facing the menu. We show that these axioms characterize a natural generalization of the Gul–Pesendorfer representation.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 46
Date: 2006-03
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Related works:
Journal Article: Temptation-Driven Preferences (2009)
Working Paper: Temptation–Driven Preferences (2006)
Working Paper: Temptation–Driven Preferences (2006)
Working Paper: Temptation–Driven Preferences (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275695

DOI: 10.22004/ag.econ.275695

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