Mood-driven choices and self-regulation

Maximilian Mihm, Kemal Ozbek

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)727-760
Number of pages34
JournalJournal of Economic Theory
Volume176
DOIs
StatePublished - Jul 2018

Keywords

  • Choice anomalies
  • Consumption-saving
  • Desire for commitment
  • Internal conflict
  • Random Strotz
  • Self-regulation

ASJC Scopus subject areas

  • Economics and Econometrics

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