Addiction and Present-Biased Preferences

O’Donoghue, Ted and Matthew Rabin
Authors registered in the RePEc Author Service: Ted O'Donoghue

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: We investigate the role that self-control problems — modeled as time-inconsistent, present-biased preferences —and a person’s awareness of those problems might play in leading people to develop and maintain harmful addictions. Present-biased preferences create a tendency to over-consume addictive products, and awareness of future self-control problems can mitigate or exacerbate this over-consumption, depending on the environment. Our central concern is the welfare consequences of this over-consumption. Our analysis suggests that for realistic environments self-control problems are a plausible source of severely harmful addictions only in conjunction with some unawareness of future self-control problems.

Keywords: addiction; hyperbolic discounting; naivete; present-biased preferences; self control; sophistication; time inconsistency (search for similar items in EconPapers)
Date: 2002-02-01
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Citations: View citations in EconPapers (29)

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Working Paper: Addiction and Present-Biased Preferences (2002)
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