Behavioural economics, time-inconsistency and self-control problems

what catergory do self-control problems fit into?

non-standard preferences

what are self-control problems?

this problem arises when decision makers are choosing between choices that have costs and benefits to them separated in time (i.e., gain today and pay tomorrow in terms of exercising).

when do discount rates become much steeper?

When it comes to discount rates, it becomes much steeper when the options of the discount rates separated by time is closer to the near future as opposed to a further future. The nearer the future is, the steeper the discount rates.

what two discount factors does the beta-delta model?

* rational factor of delta (delta referred as the normal discount)
* beta - responsible for the sharp fall concerning future payoffs between that today and tomorrow
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what will a time-inconsistent person’s utility function look like?

* they will often have beta(s) placed in their utility function.
* Beta is a number less than 1 – meaning that there’s more discounting between the present and the future compared to that of near-future and far-future, thus reflecting self-control problems

what does it mean when Beta < 1?

𝛽 < 1 means there’s more discounting between the present and the future, compared to between near-future and far-future