How the market responds to dynamically inconsistent preferences |
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Authors: | Ben McQuillin Robert Sugden |
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Institution: | 1.School of Economics, Centre for Competition Policy,University of East Anglia,Norwich,UK |
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Abstract: | This paper responds to the ‘soft paternalist’ argument that the findings of behavioural economics make traditional objections
to paternalism incoherent. We show that there is a normatively significant sense in which, even if individuals lack coherent
preferences, competitive markets are efficient in providing them with opportunities to get what they want. Extending earlier
analysis by Sugden, we model a multi-period ‘storage economy’ and explore the implications of dynamically inconsistent preferences.
We show that, despite apparent conflicts of judgement between an individual’s ‘selves’, competitive markets provide maximal
opportunity, and that they do so by facilitating voluntary exchanges between selves. |
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