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Reference-dependent self-control: Menu effects and behavioral choices

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  • Borah, Abhinash
  • Garg, Raghvi

Abstract

As is well-known, choices of a decision maker (DM) who attempts self-control in the face of temptation may exhibit menu effects and “non-standard” patterns. Existing models can accommodate some of these patterns but not others; e.g., they can explain self-control undermining menu effects, but not self-control enhancing ones. We introduce a model of self-control with the goal of better understanding and accounting for such effects. The basic idea underlying our model is that the DM experiences a psychological cost if she succumbs to temptation and chooses in a manner that is totally antithetical to her commitment preferences. To mitigate such costs, in any menu, her expression of self-control involves, first, eliminating a subset of alternatives that are worst according to her commitment preferences, with the elimination process being reference-dependent. Then, amongst the remaining alternatives, she chooses the best one according to her temptation preferences. Besides studying menu effects, we characterize the model behaviorally based on a novel axiom called WARP with norms. We also show that the model is well-identified.

Suggested Citation

  • Borah, Abhinash & Garg, Raghvi, 2023. "Reference-dependent self-control: Menu effects and behavioral choices," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 129-145.
    • Handle: RePEc:eee:jeborg:v:211:y:2023:i:c:p:129-145
    DOI: 10.1016/j.jebo.2023.04.027
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    More about this item

    Keywords

    Self-control; Temptation; Normative elimination; Reference dependence; Menu effects;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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