This paper was presented as the Fisher–Schultz Lecture at the 2010 World Congress of the Econometric Society in Shanghai. We thank Attila Ambrus, Yuichiro Kamada, Jawaad Noor, Alex Peysakhovich, Tomasz Strzalecki, and Dmitry Taubinsky for helpful comments, and the NSF, Grants SES-0646816, SES-0851315, and SES-0954162, for financial assistance.
Timing and Self-Control
Article first published online: 10 JAN 2012
© 2012 The Econometric Society
Volume 80, Issue 1, pages 1–42, January 2012
How to Cite
Fudenberg, D. and Levine, D. K. (2012), Timing and Self-Control. Econometrica, 80: 1–42. doi: 10.3982/ECTA9655
- Issue published online: 10 JAN 2012
- Article first published online: 10 JAN 2012
- Manuscript received November, 2010; final revision received May, 2011.
- dual selves;
- present bias;
- Allais paradox;
- revealed preference;
- behavioral economics
The standard dual-self model of self-control, with a shorter-run self who cares only about the current period, is excessively sensitive to the timing of decisions and to the interpolation of additional “no-action” time periods in between the dates when decisions are made. We show that when the shorter-run self is not completely myopic, this excess sensitivity goes away. To accommodate the combination of short time periods and convex costs of self-control, we introduce a cognitive resource variable that tracks how the control cost depends on the self-control that has been used in the recent past. We consider models with both linear and convex control costs, illustrating the theory through a series of examples. We examine when opportunities to consume will be avoided or delayed, and we consider the way in which the marginal interest declines with delay.