Overcompensating for Present Bias: A Note on Meta-Cognitive Adjustment in Intertemporal Choice

This paper examines the welfare consequences of metacognitive adjustment in intertemporal choice, revealing a fundamental paradox in behavioral self-correction. Using a three-period quasi-hyperbolic discounting framework, I analyze how present-biased agents who are aware of their bias might attempt to correct it through self-imposed adjustment parameters. I demonstrate that while perfect bias correction is mathematically feasible, setting λ = 1/β completely neutralizes present bias and restores exponential discounting weights (1, δ, δ²), it systematically reduces welfare compared to not correcting at all.The model shows that agents maximize their authentic welfare by setting λ = 1, corresponding to making decisions according to their original quasi-hyperbolic preferences without any metacognitive adjustment. This occurs because the agent's "true" utility function is itself defined by present-biased preferences, creating a fundamental tension between normative rationality and subjective welfare maximization. When agents force themselves to behave according to exponential discounting principles, they make consumption choices that contradict what maximizes their happiness according to their own preference structure.I derive closed-form expressions for optimal consumption allocations under different correction strategies and provide mathematical proof that λ = 1 uniquely maximizes welfare. Using numerical analysis with empirically realistic parameter values (β = 0.7, δ = 0.9), I show that perfect bias correction reduces welfare by approximately 3.9% compared to the no-correction baseline. This welfare loss persists across a wide range of parameter values, demonstrating the robustness of the self-correction paradox.The findings challenge conventional wisdom about the relationship between behavioral sophistication and welfare, suggesting that complete bias elimination may be counterproductive even when technically feasible. The results have important implications for the design of behavioral interventions, nudges, and commitment devices, indicating that such tools should respect individuals' authentic preference structures rather than imposing external standards of rationality. More broadly, the analysis illuminates a fundamental philosophical tension between normative ideals of rational choice and the goal of maximizing subjective well-being.These insights contribute to our understanding of metacognition in economic decision-making and suggest that the optimal approach to behavioral self-regulation may involve accepting rather than eliminating cognitive biases. The research opens new avenues for behavioral economics by highlighting cases where "irrational" behavior may be welfare-maximizing and where excessive self-control can reduce rather than enhance individual well-being.