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Title: Optimal policy and inconsistent preferences : behavioural policymaking and self-control
Author: Chesterley, Nicholas
ISNI:       0000 0004 5354 6584
Awarding Body: University of Oxford
Current Institution: University of Oxford
Date of Award: 2015
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This thesis takes three different perspectives, using theoretical and experimental techniques, on time-inconsistent preferences and how the existence of multiple selves can affect both consumer behaviour and policy design. Across domains such as retirement saving, health, and educational achievement, intertemporal choice presents a challenge for both individuals and policymakers. The first paper, 'Choosing When to Nudge: Designing Behavioural Policy around Decision-Making Costs,' considers how behavioural policy, which has proven increasingly popular with policymakers, affects welfare. I find that for present-biased consumers, behavioural policies help some consumers but can inefficiently discourage others from optimizing. Such policies therefore have an ambiguous effect on welfare, and similar to traditional policies, can impose equity-efficiency tradeoffs. Monopolies may increase welfare given their incentive to simplify consumer decisions instead of exploit switching costs. The second paper, 'Virtue and Vice with Endogenous Preferences,' considers behaviour when preferences are affected by consumer decisions. I introduce agents whose temptation to consume in the present is affected by how much they choose to save for the future. I find that differences between agents can trap them in divergent paths of self-improvement -- saving more, they value the future more, making saving optimal -- or binging -- consuming more makes them indifferent to future costs, making consumption optimal. At the extreme, it is frequently an optimum for a consumer to consume their entire wealth. The final paper, 'Bet You Can't Eat Just One: Consumption Complementarity and 'Self'-Control' considers an intrapersonal game between a moderate cold self and a hot self that wants to indulge. In equilibrium, sophisticated selves best respond to each other's behaviour: the cold self over-abstains and the hot self over-indulges to avoid inducing the other state. I test these ideas in the lab, and find that subjects on a diet who were induced to consume a piece of chocolate before the experiment indulge more in chocolate during the experiment, even when the initial indulgence was imposed by the experimenter. Eating a piece of chocolate, this suggests, can induce a period during which chocolate is more appealing.
Supervisor: Roberts, Kevin; Abeler, Johannes Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Economics ; Microeconomics ; Behavioural Economics ; Decision Theory ; Economic Policy ; Savings and Consumption ; Intertemporal Choice ; Preferences ; Habits ; Policy Design ; Self-Control ; Consumption ; Willpower