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Temptation, Welfare and Revealed Preference

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Author Info
Jawwad Noor () (Department of Economics, Boston University)

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Abstract

Temptation is the conflict between one’s desires (temptation preference) and one’s view of what choices he should make (normative preference). In seminal work, Gul and Pesendorfer [7, 8] provide foundations for a model of temptation on the basis of the idea that temptation creates a preference for commitment. This paper studies agents for whom temptation may in fact create the absence of a preference for commitment. An alternative approach to providing foundations is introduced. Motivated by the evidence on preference reversals, it is hypothesized that delayed temptations are easier to resist than immediate temptations. Normative preference is derived via choices between sufficiently delayed alternatives, and temptation preference is inferred from discrepancies between normative preference and choice. With a choice correspondence as the primitive, agents who are .tempted not to commit’ are modeled. The foundations of the model are used to identify evidence supporting such temptation. It is argued that normative preference serves as an appropriate guide for welfare policy.

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Publisher Info
Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2007-008.

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Length: 51 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:bos:wpaper:wp2007-008

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Related research
Keywords: Self-Control; Temptation; Commitment; Preference Reversals; Revealed Preference.;

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Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D60 - Microeconomics - - Welfare Economics - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  3. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Time orientation and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 107-135, January. [Downloadable!] (restricted)
    Other versions:
  4. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-57, April. [Downloadable!] (restricted)
    Other versions:
  5. W. Pesendorfer & F. Gul, 1999. "Self-Control and the Theory of Consumption," Princeton Economic Theory Papers 99f2, Economics Department, Princeton University.
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  6. Ted O'Donoghue & Matthew Rabin, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March. [Downloadable!] (restricted)
  7. Ravi Bansal & Amir Yaron, 2004. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," Journal of Finance, American Finance Association, vol. 59(4), pages 1481-1509, 08. [Downloadable!] (restricted)
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  8. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February. [Downloadable!] (restricted)
  9. Jawwad Noor, 2005. "Commitment and Self-Control," Boston University - Department of Economics - Working Papers Series WP2005-014, Boston University - Department of Economics. [Downloadable!]
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  10. Attanasio, Orazio P & Weber, Guglielmo, 1989. "Intertemporal Substitution, Risk Aversion and the Euler Equation for Consumption," Economic Journal, Royal Economic Society, vol. 99(395), pages 59-73, Supplemen. [Downloadable!] (restricted)
  11. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November. [Downloadable!] (restricted)
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  12. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July. [Downloadable!] (restricted)
  13. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
  14. Casey B. Mulligan, 2002. "Capital, Interest, and Aggregate Intertemporal Substitution," NBER Working Papers 9373, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Levine's Bibliography 122247000000001061, UCLA Department of Economics. [Downloadable!]
  2. Larry Epstein & Jawwad Noor & Alvaro Sandroni, 2005. "Non-Bayesian Updating: a Theoretical Framework," RCER Working Papers 518, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
    Other versions:
  3. Jawwad Noor, 2005. "Choice and Normative Preference," Boston University - Department of Economics - Working Papers Series WP2005-039, Boston University - Department of Economics. [Downloadable!]
  4. Pierre Perron & Tomoyoshi Yabu, 2005. "Estimating Deterministric Trends with an Integrated or Stationary Noise Component," Boston University - Department of Economics - Working Papers Series WP2005-037, Boston University - Department of Economics. [Downloadable!]
    Other versions:
  5. Larry Epstein & Igor Kopylov, 2006. "Cognitive Dissonance and Choice," RCER Working Papers 525, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
  6. Klaus Nehring, 2006. "Self-Control through Second-Order Preferences," Levine's Bibliography 321307000000000391, UCLA Department of Economics. [Downloadable!]
  7. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics. [Downloadable!]
  8. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2005. "Temptation–Driven Preferences," Boston University - Department of Economics - Working Papers Series WP2005-005, Boston University - Department of Economics. [Downloadable!]
    Other versions:
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