Time-inconsistency and welfare
By: Jay Bhattacharya, Darius Lakdawalla.
Contributors: Lakdawalla, Darius.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10345; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10345.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Self-control devices, such as rehabilitation programs, group commitment, and informal fines, can make time-inconsistent smokers better off.  Health economists have used this result to argue in favor of cigarette taxes that restrain smoking.  However, taxes alone are not Pareto-improving overall, because they benefit today's smoker at the expense of her future selves, who have less demand for self-control.  We suggest an alternative class of taxation policies that provide selfcontrol and benefit a smoker at every point in life.  Smokers could be allowed to purchase smoking licenses' when they start to smoke, and in exchange commit their future selves to face compensated cigarette taxes.  We show that this scheme which could be made voluntary improves the welfare of current and future smokers, generates positive revenue for the government, and can be made incentive-compatible.  Similar schemes can also be envisioned to address problems of timeinconsistency in other contexts"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/18/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.