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Debiasing or rebiasing? Moderating the illusion of delayed incentives

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  • Soman, Dilip
  • Liu, Maggie Wenjing
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    Abstract

    This paper studies corrective strategies for the illusion of delayed incentives (Soman, 1998), the phenomena that money-for-effort transactions that are unattractive in the present appear attractive when they are in the future. This illusion occurs because future effort is discounted more heavily than future monetary outcomes. In this research, we show that this bias of differential discounting can be corrected by asking consumers to perform effort at the time of decision-making. We further outline three explanations for why this intervention attenuates the illusion of delayed incentives, and discuss whether these explanations constitute a debiasing effect or a rebiasing effect (Larrick, 2004). We report the results of two laboratory experiments and discuss theoretical and practical implications of our findings.

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    File URL: http://www.sciencedirect.com/science/article/pii/S016748701000139X
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 32 (2011)
    Issue (Month): 3 (June)
    Pages: 307-316

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    Handle: RePEc:eee:joepsy:v:32:y:2011:i:3:p:307-316

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    Web page: http://www.elsevier.com/locate/joep

    Related research

    Keywords: Intertemporal choice Hyperbolic discounting Delayed incentives Debiasing Rebiasing;

    References

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    1. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
    2. Leiser, David & Azar, Ofer H. & Hadar, Liat, 2008. "Psychological construal of economic behavior," Journal of Economic Psychology, Elsevier, vol. 29(5), pages 762-776, November.
    3. Richard Thaler & Shlomo Benartzi, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments 00337, The Field Experiments Website.
    4. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
    5. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
    6. Itamar Simonson & Ziv Carmon & Suzanne O'Curry, 1994. "Experimental Evidence on the Negative Effect of Product Features and Sales Promotions on Brand Choice," Marketing Science, INFORMS, vol. 13(1), pages 23-40.
    7. Soman, Dilip, 2004. "The effect of time delay on multi-attribute choice," Journal of Economic Psychology, Elsevier, vol. 25(2), pages 153-175, April.
    8. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
    9. Soman, Dilip, 2001. " Effects of Payment Mechanism on Spending Behavior: The Role of Rehearsal and Immediacy of Payments," Journal of Consumer Research, University of Chicago Press, vol. 27(4), pages 460-74, March.
    10. Gonzalez-Vallejo, Claudia & Moran, Elizabeth, 2001. "The Evaluability Hypothesis Revisited: Joint and Separate Evaluation Preference Reversal as a Function of Attribute Importance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 86(2), pages 216-233, November.
    11. Dragone, Davide, 2009. "I am getting tired: Effort and fatigue in intertemporal decision-making," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 552-562, August.
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