To study the behavior of agents who are susceptible to temptation in infinite horizon
consumption problems under uncertainty, we define and characterize dynamic self-control
(DSC) preferences. DSC preferences are recursive and separable. In economies with
DSC agents, equilibria exist but may be inefficient; in such equilibria, steady state
consumption is independent of initial endowments and increases in self-control. Increasing
the preference for commitment while keeping self-control constant increases the equity
premium. Removing nonbinding constraints changes equilibrium allocations and prices.
Debt contracts can be sustained even if the only feasible punishment for default
is the termination of the contract.