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  1. 2.Willpower and Personal Rules Roland Bénabou and Jean Tirole [2001] 8

  2. Introduction 2. Willpower and Personal Rules (Bénabou et al. [2001]) • Tendency to succumb to short-run impulses at the expense of long-run interest • Time-inconsistent preferences overweight present relative to future • Unable to commit to optimal course • External commiment • Internal commitment (promises to oneself) 9

  3. Introduction 2. Willpower and Personal Rules (Bénabou et al. [2001]) • How to achieve self-control through adoption of personal rules? • Theory based on self-reputation over one´s willpower • Mechanism transforms lapses into precedents that undermine further self-restraint • Imperfect recall of past motives and feelings leads to self-monitoring and infering revealed preferences from past actions 10

  4. The Model: Decisions and Payoffs 2. Willpower and Personal Rules (Bénabou et al. [2001]) No-WillpowerActivity NW a • 3 possible outcomes • { NW }: ( a, 0; 0 ) • { W; G }: ( 0, 0; b ) • { W; P }: ( 0,-c;B ) Subperiod I Subperiod II time Give Up G WillpowerActivity 0 b W Persevere 0 P -c B 11

  5. Preferences: State-Dependent Willpower 2. Willpower and Personal Rules (Bénabou et al. [2001]) Willpower in normal times (known) Willpower in times of stress (revealed through experience) • Time-inconsistent (quasi-hyperbolic) preferences No-WillpowerActivity NW a • Intensity of temptation • stage-contingent • imperfectly known Subperiod I Subperiod II time Give Up G WillpowerActivity 0 b W Persevere 0 P -c B 12

  6. 2. Willpower and Personal Rules (Bénabou et al. [2001]) Preferences: Intertemporal conflict Willpower in times of stress (revealed through experience) Subperiod I: {W,P}, unless Subperiod II: Give up, whenever Subperiod I Subperiod II time Give Up G 0 b Persevere P -c B 13

  7. Preferences: Intertemporal conflict 2. Willpower and Personal Rules (Bénabou et al. [2001]) Probability of high willpower No-WillpowerActivity Period 1: {W}, unless a > expected benefits Period 2: {NW}, when > expected benefits NW a Subperiod I time Inferences about it from the past WillpowerActivity W Uncertainty about degree of willpower 0 14

  8. Information: Experience and Memory 2. Willpower and Personal Rules (Bénabou et al. [2001]) Probability of high willpower Selective memory: • forgetting lapses • making „excuses“ • „cognitive rules“ Probability of remembering past lapses Probability of remembering low costs • Updating belief about willpower • 2 problems: • attribution • self-serving bias time G Subperiod II: Give up, whenever signal from chosen action P 15

  9. Mechanism 2. Willpower and Personal Rules (Bénabou et al. [2001]) Choice reflects the strength of current temptation, his „private“ information about his true type and the „public“ information about his reputation No-WillpowerActivity NW a Individual´s choice reflects his current belief about his own willpower Subperiod I Subperiod II time Give Up G WillpowerActivity Updating his beliefs according to rational inference 0 b W Persevere 0 P -c B 16

  10. Self-reputation Concerns: Main Results 2. Willpower and Personal Rules (Bénabou et al. [2001]) • 1)extend of self-control achieved increases with the individuals confidence in his own willpower • 2)self-restraint is greater when situations are repeated and lapses more likely to be brought back • 3)forced choices inhibit development of self-confidence and autonomy 17

  11. Personal Rules 2. Willpower and Personal Rules (Bénabou et al. [2001]) • Flexibility or rigidity of personal rules: • Allowance for excuses or special circumstances • Regulation – Overregulation • Beneficial „Bright line“ rules and harmful behavior 18

  12. Conclusion 2. Willpower and Personal Rules (Bénabou et al. [2001]) • How can self-imposed rules constrain the individual´s behavior? • Theory of personal rules based on self-reputation • Imperfect knowledge of one´s willpower • Lapses interpreted as precedents • Fear of creating precedents and losing faith • Incentive that helps counter the traditional bias towards instant gratification 19