Temptation, Certainty Effect, and Diminishing Self-Control

Abstract

Gul and Pesendorfer (2001) provide a model of temptation and self-control. In a theory of choice under risk, experimental evidence suggests a “certainty effect”, that is, a decision maker tends to put more weight on a certain object in comparison with a lottery that is very likely but not completely certain. Thus what is certain may be more tempting, in other words, randomization may make objects less tempting. However, one of the axioms of Gul and Pesendorfer, called Independence, is not consistent with such a hypothesis. We provide an axiomatic model that can account for intuitive choice behavior under risk and temptation.

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