Self-Control, Moderate Consumption and Craving

CEPR Discussion Paper Series No. 2017

Posted: 12 May 1999

See all articles by Juan D. Carrillo

Juan D. Carrillo

University of Southern California - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: November 1998

Abstract

We analyze the consumption strategy of a dynamically inconsistent individual for goods that provide an immediate benefit and a delayed cost. The agent has incomplete information on the cost inherent to each unit of consumption and partially learns this value anytime he consumes. We show that, by fear of overconsuming indefinitely, the agent may (optimally) decide to abstain after some periods, even in cases where moderate consumption always dominates abstention. This provides a rationale for why dieters, former smokers, or gamblers stick to strict personal rules of behavior, such as total abstention, without invoking standard addiction arguments. We also study how urges modify the strategy of the agent and analyze some policy implications. Last, applications of this theory to other issues such as self-knowledge, willpower and habit formation are discussed.

JEL Classification: A12, D83, D90

Suggested Citation

Carrillo, Juan D., Self-Control, Moderate Consumption and Craving (November 1998). CEPR Discussion Paper Series No. 2017, Available at SSRN: https://ssrn.com/abstract=141531

Juan D. Carrillo (Contact Author)

University of Southern California - Department of Economics ( email )

3022 S. Vermont Ave.
Los Angeles, CA 90089
United States
213-740-3526 (Phone)
213-740-8543 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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