This paper empirically estimates a balanced-growth consistent, dynamic, structural model of intertemporal consumption and asset pricing that allows for, but does not assume, the GulPesendorfer preferences of temptation and self-control, using synthetic panel data constructed from the Consumer Expenditure Survey. One novelty of our model is that the cross-sectional distribution of wealth-consump...

We model agents who use self-deception to rationalize and justify actions that can eventually lead them into temptation. Formally, we extend Gul and Pesendorfer’s (2001) framework to three time periods and obtain a special functional form for the temptation utility at the interim stage. Our representation portrays an agent who is tempted (i) to relax her normative attitude towards future indulg...