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On the benefits of time-inconsistent preferences

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  • Weinschenk, Philipp

Abstract

Why are time-inconsistent preferences widespread among decision makers? This paper provides a possible explanation by showing that time-inconsistent preferences could be beneficial for decision makers that work together. Time-inconsistent preferences – which are usually blamed for having detrimental effects – can thus be advantageous for the functioning of societies. We further show that decision makers with time-inconsistent preferences are better off if they are naive rather than sophisticated concerning their inconsistency. The results do not depend on the construction of contracts or punishment schemes.

Suggested Citation

  • Weinschenk, Philipp, 2021. "On the benefits of time-inconsistent preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 185-195.
    • Handle: RePEc:eee:jeborg:v:182:y:2021:i:c:p:185-195
    DOI: 10.1016/j.jebo.2020.11.035
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    References listed on IDEAS

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    Cited by:

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    2. Marco A. Haan & Dominic Hauck, 2023. "Games with possibly naive present-biased players," Theory and Decision, Springer, vol. 95(2), pages 173-203, August.

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    More about this item

    Keywords

    Time-inconsistent preferences; Teams; Sophistication; Naiveté;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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