โ Scribed by Ted O'Donoghue; Matthew Rabin
No coin nor oath required. For personal study only.
People have self-control problems: We pursue immediate gratiยฎcation in a way that we ourselves do not appreciate in the long run. Only recently have economists considered the behavioral and welfare implications of such time-inconsistent preferences. This paper outlines a simple formal model of self-control problems, applies this model to some speciยฎc economic applications, and discusses some general lessons and open questions in the economic analysis of immediate gratiยฎcation. We emphasize the importance of the timing of the rewards and costs of an activity, as well as a person's awareness of future self-control problems. We identify situations where knowing about self-control problems helps a person and situations where it hurts her, and also identify situations where even mild selfcontrol problems can severely damage a person. In the process, we describe speciยฎc implications of self-control problems for addiction, incentive theory, and consumer choice and marketing.
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