Aggregate savings under quasi-hyperbolic versus exponential discounting

Kang, Minwook

doi:10.1016/j.econlet.2021.110006

Cited by 3 publications

(1 citation statement)

References 11 publications

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“…Finally, this article contributes to the understanding of how our decisions are affected by present bias. A growing body of an empirical literature has documented evidence of present bias across many decisions we make, including smoking (Gruber & Köszegi, 2001, 2004), exercising (DellaVigna & Malmendier, 2006), eating (Ruhm 2012), energy consumption (Schleich et al, 2019; Werthschulte & Löschel, 2021), demand deposits (Kang, 2020), aggregate savings (Kang, 2021), and participation in welfare programs (Fang & Silverman, 2009). Bradford et al (2017) show that the individuals' time preferences are significant predictors of their behaviors across multiple domains, including health, energy use, and financial decisions.…”

Section: Introductionmentioning

confidence: 99%

Addiction, present‐bias, and self‐restraint

Jin

Kang

2022

Southern Economic Journal

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We study the economic rationale for people to engage in self‐restraint. Specifically, we show that when a good is addictive and harmful, forward‐looking present‐biased consumers have an incentive to restrict their current consumption—below the level at which marginal utility of consumption equals marginal cost—in order to curb their future consumption of the harmful good. If the incentive is sufficiently strong, then present bias may encourage consumers to consume less of the addictive bad today. Finally, we show that a self‐restraint incentive can coexist with a sin tax on the addictive bad.

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