O& #39;Donoghue, T., & Rabin, M. (1999). Doing it now or later. American Economic Review, 89(1), 103-124.

The authors examine self-control problems–modeled as time-inconsistent, present-biased preferences–in a model where a person must do an activity exactly once. They emphasize two distinctions: do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate–do too soon–immediate-reward activities. Sophistication mitigates procrastination but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.

 

 

O’Donoghue, T., &Rabin, M. (1999). Doing it now or later. American Economic Review, 89(1), 103-124.

DOI: 10.1257/aer.89.1.103