Temptation-driven preferences

Eddie Dekel*, Barton L. Lipman, Aldo Rustichini

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

67 Scopus citations

Abstract

"My own behaviour baffles me. For I find myself not doing what I really want to do but doing what I really loathe." Saint Paul: What behaviour can be explained using the hypothesis that the agent faces temptation but is otherwise a "standard rational agent"? In earlier work, Gul and Pesendorfer (2001) use a set betweenness axiom to restrict the set of preferences considered by Dekel, Lipman and Rustichini (2001) to those explainable via temptation. We argue that set betweenness rules out plausible and interesting forms of temptation including some which may be important in applications. We propose a pair of alternative axioms called DFC, desire for commitment, and AIC, approximate improvements are chosen. DFC characterizes temptation as situations in which given any set of alternatives, the agent prefers committing herself to some particular item from the set rather than leaving herself the flexibility of choosing later. AIC is based on the idea that if adding an option to a menu improves the menu, it is because that option is chosen under some circumstances. From this interpretation, the axiom concludes that if an improvement is worse (as a commitment) than some commitment from the menu, then the best commitment from the improved menu is strictly preferred to facing that menu. We show that these axioms characterize a natural generalization of the Gul-Pesendorfer representation.

Original languageEnglish (US)
Pages (from-to)937-971
Number of pages35
JournalReview of Economic Studies
Volume76
Issue number3
DOIs
StatePublished - 2009

ASJC Scopus subject areas

  • Economics and Econometrics

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