Abstract

Though economists assume that intertemporal preferences are time-consistent, evidence suggests that a person 's relative preference for well-being at an earlier moment over a later moment increases as the earlier moment gets closer. We explore the behavioral and welfare implications of such time-inconsistent preferences in a simple model where a person must engage in an activity exactly once during some duration. We focus on two sets of distinctions. First, do choices involve salient costs # where the costs of an action are immediate but any rewards are delayed # or do they involve salient rewards # where the rewards of an action are immediate but any costs are delayed? Second, are people sophisticated #theyforesee future self-control problems # or are they naive # they do not anticipate these self-control problems? Naive people procrastinate activities with salient costs and preproperate #dotoo soon # activities with salient rewards. If costs are salient, sophistication mitigates procrastination, and can even lead sophisticated people to do the activity sooner than if they had no self-control problem . If rewards are salient, sophistication exacerbates preproperation. These behavioral results have corresponding welfare implications: With salient costs, mild self-control problems can severely damage a person only if she is naive, while with salient rewards mild self-control problems can severely damage a person only if she is sophisticated. We also consider a multiple-activity version of the model, and discuss how our results might apply to savings, addiction, and other behaviors. Keywords: Doing It, Hyperbolic Discounting, Preproperation, Procrastination, Time Inconsistency. JEL Classifications: A12, B49, C70, D11, D60, D74, D91, E21 Acknowledgments: We thank Steven Bl...

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