Incentivizing self-control effort
Journal of economic behavior & organization, 2019, Vol. 164, pp. 13-30
ABRARDI, Laura, CAMBINI, Carlo, Incentivizing self-control effort, Journal of economic behavior & organization, 2019, Vol. 164, pp. 13-30 - https://hdl.handle.net/1814/65989
Retrieved from Cadmus, EUI Research Repository
We analyze the determinants of the incentives that a paternalistic social planner should provide to improve the behavior of time-inconsistent consumers. We focus on the specific case in which consumers can reduce their future consumption by exerting self-control effort in non-observable and non-contractible activities. For example, they can reduce their future healthcare costs by practicing physical exercise. Differently from the results obtained by the sin taxes theory, we find that incentives that address the under-exertion of effort by present-biased consumers are always socially costly even when consumers are homogeneous. Moreover, we show that incentives are first increasing and then decreasing in the level of time-inconsistency, due to the ineffectiveness of incentive policies. Incentives are also affected by the degree of naivety in a non-monotonic way. (C) 2019 Elsevier B.V. All rights reserved.
Available online 4 June 2019
Cadmus permanent link: https://hdl.handle.net/1814/65989
Full-text via DOI: 10.1016/j.jebo.2019.05.030
ISSN: 0167-2681; 1879-1751
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