Nber Working Paper Series the Shape of Temptation: Implications for the Economic Lives of the Poor
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چکیده
This paper argues that the relation between temptations and the level of consumption plays a key role in explaining the observed behaviors of the poor. Temptation goods are defined to be the set of goods that generate positive utility for the self that consumes them, but not for any previous self that anticipates that they will be consumed in the future. We show that the assumption of declining temptations, which says that the fraction of the marginal dollar that is spent on temptation goods decreases with overall consumption, has a number of striking implications for the investment, savings, borrowing and risk-taking behavior of the poor, which would not arise if temptations were either non-declining or entirely absent. Moreover the predicted behaviors under the declining temptation assumption can help us explain some of the puzzling facts about the poor that have been emphasized in the recent literature. Abhijit Banerjee MIT Department of Economics E52-252d 50 Memorial Drive Cambridge, MA 02142-1347 and NBER [email protected] Sendhil Mullainathan Department of Economics Littauer 208 Harvard University Cambridge, MA 02138 and NBER [email protected] The Shape of Temptation: Implications for the Economic Lives of the Poor∗ Abhijit V. Banerjee MIT, BREAD, CEPR, NBER Sendhil Mullainathan Harvard University, BREAD, NBER
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The Shape of Temptation : Implications for the Economic Lives of the Poor Abhijit
This paper argues that the relation between temptations and the level of consumption plays a key role in explaining the observed behaviors of the poor. Temptation goods are defined to be the set of goods that generate positive utility for the self that consumes them, but not for any previous self that anticipates that they will be consumed in the future. We show that the assumption of declining...
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