"Doing It Now or Later"

by Ted O'Donoghue and Matthew Rabin

American Economic Review, 89(1), March 1999, 103-124

Abstract

We examine the implications of self-control problems -- modeled as time-inconsistent, present-biased preferences -- in a simple model where a person must do an activity exactly once. We emphasize two distinctions: Do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate -- do too soon -- immediate-reward activities. Sophistication mitigates procrastination, but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.