The second prediction is that “sophisticated” households will make an effort to limit overspending by following a rule that limits borrowing during the pay period. This particular rule has been emphasized in the literature on self-control (Benabou and Tirole, 2004; Thaler and Shefrin, 1981; Thaler, 1999; Benhabib and Bisin, 2004; Loewenstein and O’Donoghue, 2005). In the language of Thaler and Shefrin, this rule is part of a system of “mental accounting,” which makes the future income “account” less accessible than the current account
