Mood-driven Choices and Self-regulation

52 Pages Posted: 11 Oct 2016 Last revised: 8 Jan 2018

See all articles by Maximilian Mihm

Maximilian Mihm

New York University (NYU) - Abu Dhabi

Kemal Ozbek

University of St Andrews, School of Economics & Finance

Date Written: January 05, 2018

Abstract

We model a decision maker who can exert costly effort to regulate herself, thereby reducing internal conflicts between her normative objectives and mood-driven choices. We provide an axiomatic characterization of the model, and show how costs of self-regulation can be elicited and compared across individuals. In a consumption-saving problem we show that self-regulation can generate unintended income effects, which have important implications for public policies on saving behavior. We also provide several examples to illustrate how self-regulation can rationalize many well-known choice anomalies. These behavioral implications follow from a key feature of the model that self-regulation decisions can respond to changes in incentives.

Keywords: choice anomalies, consumption-saving, desire for commitment, internal conflict, random Strotz, self-regulation

JEL Classification: D01 Microeconomic Behavior: Underlying Principles, D11 Consumer Economics: Theory

Suggested Citation

Mihm, Maximilian and Ozbek, Kemal, Mood-driven Choices and Self-regulation (January 05, 2018). Available at SSRN: https://ssrn.com/abstract=2850079 or http://dx.doi.org/10.2139/ssrn.2850079

Maximilian Mihm

New York University (NYU) - Abu Dhabi ( email )

Abu Dhabi
United Arab Emirates

Kemal Ozbek (Contact Author)

University of St Andrews, School of Economics & Finance ( email )

Castlecliffe, The Scores
St Andrews, Fife KY16 9AR
United Kingdom

HOME PAGE: http://https://sites.google.com/a/cornell.edu/kemal-ozbek/home

Register to save articles to
your library

Register

Paper statistics

Downloads
168
Abstract Views
628
rank
181,577
PlumX Metrics