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The economics of immediate gratification
Author(s) -
O'Donoghue Ted,
Rabin Matthew
Publication year - 2000
Publication title -
journal of behavioral decision making
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.136
H-Index - 76
eISSN - 1099-0771
pISSN - 0894-3257
DOI - 10.1002/(sici)1099-0771(200004/06)13:2<233::aid-bdm325>3.0.co;2-u
Subject(s) - gratification , delay of gratification , control (management) , self control , incentive , intertemporal choice , dynamic inconsistency , process (computing) , psychology , behavioral economics , economics , social psychology , computer science , microeconomics , management , operating system
People have self‐control problems: We pursue immediate gratification in a way that we ourselves do not appreciate in the long run. Only recently have economists considered the behavioral and welfare implications of such time‐inconsistent preferences. This paper outlines a simple formal model of self‐control problems, applies this model to some specific economic applications, and discusses some general lessons and open questions in the economic analysis of immediate gratification. We emphasize the importance of the timing of the rewards and costs of an activity, as well as a person's awareness of future self‐control problems. We identify situations where knowing about self‐control problems helps a person and situations where it hurts her, and also identify situations where even mild self‐control problems can severely damage a person. In the process, we describe specific implications of self‐control problems for addiction, incentive theory, and consumer choice and marketing. Copyright © 2000 John Wiley & Sons, Ltd.