American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Doing It Now or Later
American Economic Review
vol. 89,
no. 1, March 1999
(pp. 103–124)
Abstract
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.Citation
O'Donoghue, Ted, and Matthew Rabin. 1999. "Doing It Now or Later." American Economic Review 89 (1): 103–124. DOI: 10.1257/aer.89.1.103JEL Classification
- D15 Intertemporal Consumer Choice; Life Cycle Models and Saving
- D11 Consumer Economics: Theory