Economics

The public economics of self control

Document Type

Conference Paper

Abstract

This paper analyzes self-control problems in intertemporal consumption of a sin good where current consumption imposes a negative externality on one's future selves due to the existence of present-biased preferences. We introduce the negative externality dubbed 'internality', which is augmented by the cumulative distribution function of the sum of previous consumption. We show that the shot-run self with self-control problem over consumes the sin good compared to that of the long-run self without present-biased preferences. Further, we investigate the effectiveness of self-bargaining with the presence of an external control devise as possible punishment. The short-run self faces three possible options: do nothing, accept the long-run self's offer, or reject the offer. In the latter case an external control devices is implemented. It is shown that successful self-bargaining depends on the efficiency of the control device. © Springer Science + Business Media, LLC 2008.

Publication Title

Journal of Economics and Finance

Publication Date

10-2008

Volume

32

Issue

4

First Page

356

Last Page

367

ISSN

1055-0925

DOI

10.1007/s12197-008-9047-1

Keywords

merit want, self-control

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