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Identifying What is Tempting

Alexander Groves

2013 Papers from Job Market Papers

Abstract: An individual with present bias is one who is particularly impatient for consumption now at the expense of consumption later, but less impatient between any two dates in the future. A hypothesis for the cause of present bias is that immediate consumption is subject to temptation, whereas future consumption is not. Under this hypothesis an individual's level of present bias is a combination of what she is tempted to do and the amount of self-control she uses to avoid succumbing to this temptation. I show that given a level of present bias what is tempting and how much self-control is used is not always identified: it could be that she is tempted to consume everything she has available right now, but she controls herself; that her temptation is more mild and she succumbs to it completely; or something in between. I then present an algorithm that is able to disentangle this combination by eliciting the maximum price she will pay for commitment and her present bias. This works because for a given level of present-bias commitment becomes more valuable as the effort required to control one's self increases.

JEL-codes: D0 D9 (search for similar items in EconPapers)
Date: 2013-11-21
New Economics Papers: this item is included in nep-mac
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