Journal Article

Temptation-Driven Preferences

Eddie Dekel, Barton L. Lipman and Aldo Rustichini

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 76, issue 3, pages 937-971
Published in print July 2009 | ISSN: 0034-6527
Published online July 2009 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2009.00560.x
Temptation-Driven Preferences

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  • Household Behaviour and Family Economics
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“My own behaviour baffles me. For I find myself not doing what I really want to do but doing what I really loathe.” Saint Paul

What behaviour can be explained using the hypothesis that the agent faces temptation but is otherwise a “standard rational agent”? In earlier work, Gul and Pesendorfer (2001) use a set betweenness axiom to restrict the set of preferences considered by Dekel, Lipman and Rustichini (2001) to those explainable via temptation. We argue that set betweenness rules out plausible and interesting forms of temptation including some which may be important in applications. We propose a pair of alternative axioms called DFC, desire for commitment, and AIC, approximate improvements are chosen. DFC characterizes temptation as situations in which given any set of alternatives, the agent prefers committing herself to some particular item from the set rather than leaving herself the flexibility of choosing later. AIC is based on the idea that if adding an option to a menu improves the menu, it is because that option is chosen under some circumstances. From this interpretation, the axiom concludes that if an improvement is worse (as a commitment) than some commitment from the menu, then the best commitment from the improved menu is strictly preferred to facing that menu. We show that these axioms characterize a natural generalization of the Gul-Pesendorfer representation.

Keywords: D01; D11

Journal Article.  16088 words.  Illustrated.

Subjects: Household Behaviour and Family Economics ; Microeconomics

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