Past and Future: Backward and Forward Discounting

We study a model of time preference in which both current consumption and the memory of past consumption enter "experienced utility"-or the felicity-of an individual. An individual derives overall utility from her own felicity and the anticipated felicities of future selves. These postulates permit an agent to anticipate future regret in current decisions, and generate a set of novel testable implications in line with empirical evidence. The model can be applied to disparate phenomena, including present bias, equilibrium savings behavior, anticipation of regret, and career concerns.