Abstract
We propose a Markov Decision Process Model that blends ideas from Psychological research and Economics to study decision-making in individuals with self-control problems. We have borrowed a dual-process of decision-making with self-awareness from Psychological research, and we introduce present bias in inter-temporal preferences, a phenomenon widely explored in Economics. We allow for both an exogenous and endogenous, state-dependent, present bias in inter-temporal decision-making and explore, by means of numerical simulations, the consequences on well-being emerging from the solution of the model. We show that, over time, self-awareness may mitigate present bias and suboptimal choice behaviour.
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