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Doing It Now or Later

Publication Date:
Jan 1999
Published In:
Project Programs:
Behavioral Economics

We examine self-control problems--modeled as time-inconsistent, present-biased preferences--in a model where a person must do an activity exactly once. We emphasize two distinctions: Do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate--do too soon--immediate-reward activities. Sophistication mitigates procrastination, but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.

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