ABSTRACT
Self-control problems are commonplace, but assumed away in the standard discounted utility model. This chapter allows for self-control problems by developing an alternative model that replaces the exponential discount function (and its constant discount rate) with a quasi-hyperbolic discount function that discounts the near future at a higher rate than the distant future. In doing so, the model captures a bias towards the present. This model of present-biased preferences is applied to two different types of consumer choice problems. The first is a decision whether or not to consume a good that generates benefits in one period and costs in another. The second application concerns the timing of when to complete an activity that must be done before some deadline. The chapter concludes with a range of empirical evidence — from health, education, and savings contexts — for present bias.
