Temptation in Continuous Time

Abstract

In their paper Temptation and Self Control, Gul and Pesendorfer propose a 2-period model for temptation. While this 2-period model can be trivially extended to apply over arbitrarily small time increments, it does not have a trivial continuous time extension. This paper extends their discrete time model to a temptation model that is well defined in a continuous time setting.