Early Decisions: A Regulatory Framework / John Beshears, James J. Choi, David Laibson, Brigitte Madrian.

Format:

Book

Author/Creator:

Beshears, John.

Contributor:

National Bureau of Economic Research.

Choi, James J.

Laibson, David.

Madrian, Brigitte.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11920.

NBER working paper series no. w11920

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Early Decisions

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

We describe a regulatory framework that helps consumers who have difficulty sticking to their own long-run plans. Early Decision regulations help long-run preferences prevail by allowing consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. In the cigarette market, examples of Early Decision regulations include restricting the locations or times at which cigarettes are sold, delaying the receipt of cigarettes following purchase, and allowing a consumer to choose in advance the legal restrictions on her own cigarette purchases. A formal model of Early Decision regulations demonstrates that Early Decisions are optimal when consumer preferences are heterogeneous. Intuitively, each consumer knows his own preferences, so self-rationing - which is what Early Decisions enable - is better than a one-size-fits-all regulation like a sin tax. Of course, Early Decision regulations incur social costs and therefore require empirical evaluation to determine their net social value.

Notes:

Print version record

January 2006.