Sophistication about Self-Control

Abstract

We propose a broadly applicable empirical approach to classify individuals as time consistent versus naive or sophisticated regarding their self-control limitations. Operationalizing our approach based on nationally representative data reveals that self-control problems are pervasive and that most people are at least partly aware of their limited self-control.

Compared to naïfs, sophisticates have higher IQs, better educated parents, and are more likely to take up commitment devices. Accounting for both the level and awareness of self-control limitations has predictive power beyond one-dimensional notions of self-control that neglect awareness. Importantly, sophistication fully compensates for self-control problems when choices involve immediate costs and later benefits. Raising people's awareness of their own self-control limitations may thus assist them in overcoming any adverse consequences.

Keywords: self-control; sophistication; naïveté; commitment devices; present bias

JEL Classification: D91, D01