Time Preference and Addictive Consumption: Experimental and Theoretical Approaches

Abstract

This dissertation studies the relationship between time preference and addictive consumption. I first provide the theoretical background and the simulation results of an intertemporal choices model; then discuss the experimental approach to study the relationship between time preference and addictive consumption in the lab setting. From there I draw conclusions of the relationship between time preference and addictive consumption. The main contribution of the dissertation is to add new empirical evidence to the literature of addictive consumption and time preference.

In the first chapter, I give an overview of this topic and address the importance of the issue, and then I provide an extensive literature review in this area.

In the second chapter, I illustrate my baseline model, simulate a life cycle intertemporal choices problem and illustrate optimal consumption paths under different circumstances.

In the third chapter, I use an incentivized consumption game to simulate addictive behavior in the lab setting and correlate the subjects’ behaviors with their time preference by using various measures in the experiment.

In the last chapter, I conclude this dissertation and address some problems for future research.