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Theory and Decision

Erschienen in:

01.07.2015

Extended present bias: a direct experimental test

verfasst von: Robin Chark, Soo Hong Chew, Songfa Zhong

Erschienen in: Theory and Decision | Ausgabe 1/2015

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Abstract

This study experimentally tests our proposed extended present bias hypothesis—discount factor increases over the proximate future and eventually approaches constancy, but remains distinct from unity in the remote future. Using front-end delay and a post-dated check for payment, discount factors are elicited for three seven-day durations: between 2 and 9 days later (proximate), between 31 and 38 days later (intermediate), and between 301 versus 308 days later (remote). We find support for diminishing discounting between the proximate and intermediate comparisons, but not between the intermediate and the remote comparisons. The findings validate our extended present bias hypothesis.

Vorheriger Artikel Politicians, governed versus non-governed interest groups and rent dissipation

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Since people are impatient (i.e., they prefer to receive the same amount of money or even a smaller amount sooner than later), the discount factor, which equals \(1/(1+r)^{{\textit{t}}}\) where r is the discount rate, is the present value of a future payment at time t and should be smaller than one and decrease with time.

Earlier literature has been criticized for the liberal use of hypothetical questions and the lack of controls for effects that may be due to framing and transaction cost, among others [see Frederick et al. (2002) for a review of different methods]. This has given rise to a subsequent literature that employs real monetary incentives to elicit discount rates.

Halevy further links his account to the social learning theory of Rotter (1954) by emphasizing the role of life experience in shaping the individual’s preferences (personality) and subjective beliefs in evaluating alternative actions. In the context of near term versus remote term rewards, a person may adhere to the probability that a promise of a delayed reward will not be kept. Support for Rotter’s hypothesis can be found in studies such as that of Mischel (1961), who showed that father-absent children possess lower expectations for the delivery of the promise of delayed reward, resulting in seemingly more impatient choices.

The studies of Read (2001) and Read and Roelofsma (2003) did not use incentivized experiments.

Group level estimation of parameters in different utility specifications from choices in multiple price lists is done to elicit degree of risk aversion (Holt and Laury 2002) and discounting (Andersen et al. 2011).

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Titel: Extended present bias: a direct experimental test
verfasst von: Robin Chark
Soo Hong Chew
Songfa Zhong
Publikationsdatum: 01.07.2015
Verlag: Springer US
Erschienen in: Theory and Decision / Ausgabe 1/2015
Print ISSN: 0040-5833
Elektronische ISSN: 1573-7187
DOI: https://doi.org/10.1007/s11238-014-9462-z

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