Measuring Self-Control Problems : A Structural Estimation

Motivated by experimental findings and the literature on modular brain functions, we simulate the intertemporal decisions of consumers affected by temptation. In this framework, the lack of self-control distorts agents choices and reduces their wellbeing. While their consumption behaviour is similar to the one predicted with alternative models, tempted agents exhibit a pathological desire to invest in commitment devices even when this is irrational for standard life-cycle optimisers. Performing a structural estimation based on information on US illiquid asset holdings, we find evidence of a low but significant degree of temptation, especially in households with a more highly educated head