We investigate the role that self-control problems modeled as time-inconsistent, present-biased preferences and a person's awareness of those problems might play in leading people to develop and maintain harmful addictions. Present-biased preferences create a tendency to over-consume addictive...

Arrow (1971) shows that an expected-utility maximizer with a differentiable utility function will always want to take a sufficiently small stake in any positive-expected-value bet. That is, expected- utility maximizers are arbitrarily close to risk neutral when stakes are arbitrarily small....