A “Dual Self” Representation for Stochastic Temptation

Abstract

We consider the following two-period problem of self-control. In the first period, an individual has to decide on the set of feasible choices from which she will select one in the second period. In the second period, the individual might choose an alternative that she would find inferior in the first period, an eventuality that need not occur with certainty. We propose a model for this problem and axioms for first-period preferences, in which the second-period choice could be interpreted as being made by an “alter ego” who appears randomly. We provide a discussion of the behavioral implications of our model as compared with existing theories. (JEL D11, D80)