Rationalizing Present and Future Bias

This paper rationalizes both present and future bias in a single expected utility framework. The model considers a situation where mortality risk depends on the current state of health. When the state transition satisfies total positivity of order 2, rational decision makers are shown to have present bias when in poor health and future bias when in good health. The findings suggest that unhealthy behavior and resulting poor health may be the cause of present bias not its consequence as is often believed.