Download This PaperPresent-Focused Preferences and Sin Goods Consumption at the Extensive and Intensive Margins
56 Pages Posted: 24 Apr 2020
Date Written: 2020
Abstract
This paper analyzes sin goods consumption when individuals exhibit present-focused preferences. It considers three types of present focus: present-bias with varying degrees of naiveté, Gul-Pesendorfer preferences, and a dual-self approach. We investigate the incentives to deviate from healthy consumption (the extensive margin). In the first model, the extensive margin of consumption is independent of the degree of present-bias and naiveté. Likewise, in the latter frameworks, the strength of temptation and the cost of self-control do not affect the extensive margin. Hence, present-focused preferences affect the intensive margin of sin goods consumption, but not the extensive margin.
Keywords: present-bias, self-control, temptation, dual-self, sin goods
JEL Classification: D110, D150, D600, D910, I120
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