Doing It Now or Later
O'Donoghue, Ted, and
Matthew Rabin. 1999. "Doing It Now or Later."
American Economic Review,
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.
Article Full-Text Access
O'Donoghue, Ted (Cornell U)
Rabin, Matthew (U CA, Berkeley)
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
D11: Consumer Economics: Theory