Addiction and Self-Control: An Intrapersonal Game

In their model of addiction, O´Donoghue and Rabin obtain a counterintuitive result: a person that is fully aware of his self-control problems (sophisticate) is more prone to become addicted than one who is fully naware (na¨if). In this paper we show that this result arises from their particular equilibrium selection for the induced intra-personal game. We provide dominating Markov Perfect equilibria where the paradox vanishes and that seem more natural" since they capture behaviors often observed in the realm of addiction. We also address the issue of why an unaddicted person could decide to start consuming and possibly develop an addiction. In particular, we show that their equilibrium implies that both naifs and sophisticates will slip into addiction. In contrast, by considering our results, only naifs will become addicted which is in accordance to the common intuition. Finally, we suggest a clear-cut way"