Temptation, Welfare and Revealed Preference

Abstract

Choice may be determined both by a consideration of one's welfare (normative preference) and by desires (temptation preference). To provide foundations for such a theory, Gul and Pesendorfer (2001, 2004) adopt a preference over choice problems as a primitive and hypothesize that temptation creates a preference for commitment. This paper argues that temptation may in fact create the absence of a preference for commitment, and that the primitive may not be empirically meaningful since it requires us to observe behavior in the absence of temptation. An alternative approach to providing foundations is introduced. Motivated by the evidence on preference reversals, it is hypothesized that delayed temptations are easier to resist than immediate temptations. Normative preference is derived via choices between sufficiently delayed alternatives, and temptation preference is inferred from discrepancies between normative preference and choice. With a choice correspondence as the primitive, agents who are `tempted not to commit' are modeled. The foundations of the model are used to identify evidence supporting such temptation.Self-Control, Temptation, Commitment, Preference Reversals, Revealed Preference