Survey_HR_2005

Abstract

"We depart from models of unitary households and allow each household to consist of two entities, that can be thought of either as two different people or as two ""selves"". We will call one entity the ""accountant"", who pays bills and handles household finances, and the other the ""shopper"" who makes purchases with a credit card, taking the available balance on the credit card as given. We will using ""he"" for both, to avoid gender interpretations. In our formulation the acoountant and the shopper have different assigned roles.We model a self-control problem as arising from impatience and lack of financial sophitication in shopping decisions. We model the interaction between a sophisticated self that behaves according to the basic paradigma of economic theory, and another self, more ompatient and less sophisticated. In the benchmark, the game is not played between two fully rational agents under asymmetric information or beliefs, but between a financially sophisticated leader who is trying to double-guess and restrain an impatient, unsophisticated, though predictable shopper who behaves on the basis of simpler beliefs regarding future amounts of consumable resources. At the beginning of each period, the accountant decides how much to pay intp the credit card account, and thus he dertmines the amount of consumable resources that the shopper has at his disposal in order to buy consumption goods. "