| Chapter 1 addresses the role of self-set, non-binding goals as a source of internal motivation to attenuate the self-control problem of a hyperbolic discounter. Agents have linear reference-dependent preferences and endogenously set a goal that serves as the reference point. They face an infinite horizon, optimal stopping problem in continuous time. I show that goal-setting attenuates the hyperbolic agent's tendency to stop too early, but too much reference dependence leads an agent to wait longer than the first-best. Extending the model to social comparisons, I find that comparison to increasingly patient peers induces increasingly patient behavior. Nonetheless, every agent prefers to compare himself to a peer with the lowest degree of self-control possible.;Chapter 2 extends the framework developed in Chapter 1 to address the role of goal bracketing to improve a hyperbolic discounter's self-control. When setting non-binding goals in a sequential stopping problem, he also decides how and when to evaluate himself against such goals. He can bracket broadly by setting an aggregate goal for the entire project, or narrowly by setting incremental goals for individual stages. If the agent is sufficiently loss averse and ex-ante uncertainty is high, he will choose to bracket broadly; otherwise, he brackets narrowly despite the disutility from frequent goal evaluation. Whether he stops earlier or later than the first-best depends on the level of ex-ante uncertainty.;Chapter 3 offers an information-based account of the existence of lifestyle brands and analyzes firms' brand investment and pricing choices in a duopoly setting. If agents have uncertainty over their preferences but are aware that these are correlated with those of others, there exists an incentive to communicate and learn from others with similar tastes. When firms can offer branded goods as coordination mechanisms for their customers, they become associated with specific subgroups, forming lifestyle brands. In a duopoly setting, only one firm chooses to invest in a brand. Surprisingly, although total surplus increases as a result of the provision of this mechanism, consumer surplus decreases. Consumers benefit from learning from one another, but all of this surplus (and more) is extracted by the firms through pricing. |
