Self-regulation through Goal Setting

Goals are an important motivator. But little is known about why and how people set them. We address this issue in a model based on two stylized facts. First, goals serve as reference points for performance. Second, present-biased preferences create self-control problems. We show the power and limits of self-regulation through goals. Goals increase an individual's motivation-but only up to a certain point. Furthermore, they are painful self-disciplining devices. Thus, greater self-control problems may result in tougher goals; but for a severe present bias goals either lack a motivating force, or are too painful to be accepted.