Incentives and Self Control for Helpful Comments, We Thank

We investigate the design of incentives for people subject to self-control problems in the form of a time-inconsistent taste for immediate gratification. Because such presentbiased people may not behave in their own long-run best interests, there is scope for firms, policymakers, friends and family, and the people themselves to create incentives for ‘‘better’’ behavior. Moreover, whereas for standard agents only ultimate well-being from different courses of action matter, for present-biased people the detailed structure of incentives becomes of critical importance. Optimal incentive design, therefore, will attend to details that the conventional model would say are essentially irrelevant. We describe some general principles that have emerged in recent and ongoing research on incentives, highlighting the importance of heterogeneity among agents and providing for flexibility, and illustrate these principles with some simple examples.