Botond Kőszegi

FUTILE ATTEMPTS AT SELF-CONTROL

We investigate costly yet futile attempts at self-control when consumption of a harmful product has a binary breakdown/no-breakdown nature and individuals tend to underestimate their need for self-control. Considering time-inconsistent preferences as well as temptation disutility, we show that becoming more sophisticated can decrease welfare and investigate what kind of mistaken beliefs lead to low welfare. With time-inconsistent preferences, being close to perfectly understanding ones preferences but assigning zero probability to true preferences induces the worst outcome. (JEL: D03, D11, D91) (c) 2009 by the European Economic Association.