Seminar

Costly Self Control and Random Self Indulgence

Eddie Dekel (Northwestern University)

May 19, 2011, 15:30–17:00

Toulouse

Room MF 323

BEE Seminar

Abstract

We study the random Strotz model, a version of the Strotz (1955) model with uncertainty about the nature of the temptation that will strike. We show that the random Strotz representation is unique and characterize a comparative notion of \more temptation averse." Also, we demonstrate an unexpected connection between the random Strotz model and the Gul{Pesendorfer (2001) (GP) model of temptation. In particular, a preference over menus has a GP representation i it also has a representation via a random Strotz model with su ciently smooth uncertainty about the intensity of temptation. We also show that choices of menus combined with choices from menus can distinguish the random GP and random Strotz models.