The Theory of Binding Commitments Simplified and Extended, with Generalization to Interpersonal Allocation

Self-control theories of struggle among several coexisting “selves” have recently been offered to explain such behaviors as foregoing anesthesia, quitting smoking, and ordinary saving. Strotz formally modeled such situations without the concept of coexisting selves, however. This article (a) boils down the Strotz formalism to three simple present-value equations, (b) argues that the framework applies to many ordinary commercial transactions rather than only to exceptional personal decisions, (c) does not require the concept of simultaneous selves, (d) places the subject within conventional economics with the concept of externalities, and (e) suggests that intra-individual allocation is similar to allocation between the given individual and other individuals. The key assumption is that the discount between the individual's present “person” and the individual's future “persons” is great compared to discounts among the future persons. This assumption is central to the analysis of Strotz and to Ainslie's behavioral analysis of self-control mechanisms.