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

Author

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  • Abhinash Borah

    (Ashoka University)

  • Raghvi Garg

    (Ashoka University)

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

  • Abhinash Borah & Raghvi Garg, 2022. "Reference-dependent self-control: Menu effects and behavioral choices," Working Papers 83, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:83
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    References listed on IDEAS

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    1. David K. Levine & Drew Fudenberg, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, vol. 96(5), pages 1449-1476, December.
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    3. Kathryn M. Sharpe & Richard Staelin & Joel Huber, 2008. "Using Extremeness Aversion to Fight Obesity: Policy Implications of Context Dependent Demand," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 35(3), pages 406-422, April.
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