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Concentration Bias in Intertemporal Choice

Author

Listed:
  • Markus Dertwinkel-Kalt
  • Holger Gerhardt
  • Gerhard Riener
  • Frederik Schwerter
  • Louis Strang

Abstract

Many intertemporal trade-offs are unbalanced: while the advantages of options are concentrated in a few periods, the disadvantages are dispersed over numerous periods. We provide novel experimental evidence for “concentration bias”, the tendency to overweight advantages that are concentrated in time. Subjects commit to too much overtime work that is dispersed over multiple days in exchange for a bonus that is concentrated in time: concentration bias increases subjects’ willingness to work by 22.4% beyond what standard discounting models could account for. In additional conditions and a complementary experiment involving monetary payments, we study the mechanisms behind concentration bias and demonstrate the robustness of our findings.

Suggested Citation

  • Markus Dertwinkel-Kalt & Holger Gerhardt & Gerhard Riener & Frederik Schwerter & Louis Strang, 2021. "Concentration Bias in Intertemporal Choice," CESifo Working Paper Series 9011, CESifo.
    • Handle: RePEc:ces:ceswps:_9011
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    References listed on IDEAS

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    12. Benjamin Bushong & Matthew Rabin & Joshua Schwartzstein, 2021. "A Model of Relative Thinking," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 162-191.
    13. Dertwinkel-Kalt, Markus & Köster, Mats & Peiseler, Florian, 2019. "Attention-driven demand for bonus contracts," European Economic Review, Elsevier, vol. 115(C), pages 1-24.
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    Cited by:

    1. Canidio, Andrea & Karle, Heiko, 2022. "The focusing effect in negotiations," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 1-20.
    2. Dertwinkel-Kalt, Markus & Wenzel, Tobias, 2019. "Focusing and framing of risky alternatives," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 289-304.
    3. Adloff, Susann, 2021. "Adapting to Climate Change: Threat Experience, Cognition and Protection Motivation," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242400, Verein für Socialpolitik / German Economic Association.
    4. Dertwinkel-Kalt, Markus & Köster, Mats & Peiseler, Florian, 2019. "Attention-driven demand for bonus contracts," European Economic Review, Elsevier, vol. 115(C), pages 1-24.
    5. Benjamin Enke & Thomas W. Graeber, 2021. "Cognitive Uncertainty in Intertemporal Choice," CESifo Working Paper Series 9472, CESifo.
    6. Benjamin Enke & Thomas Graeber & Ryan Oprea, 2023. "Complexity and Time," CESifo Working Paper Series 10327, CESifo.
    7. Jason Somerville, 2022. "Range‐Dependent Attribute Weighting in Consumer Choice: An Experimental Test," Econometrica, Econometric Society, vol. 90(2), pages 799-830, March.
    8. Markus Dertwinkel-Kalt & Mats Köster & Matthias Sutter, 2019. "To Buy or not to Buy? Shrouding and Partitioning of Prices in an Online Shopping Field Experiment," CESifo Working Paper Series 7475, CESifo.
    9. Evert Reins, 2021. "Seductive subsidies? An analysis of second-degree moral hazard in the context of photovoltaic solar systems," IRENE Working Papers 21-03, IRENE Institute of Economic Research.
    10. George Loewenstein & Zachary Wojtowicz, 2023. "The Economics of Attention," CESifo Working Paper Series 10712, CESifo.
    11. Ayala Arad & Amnon Maltz, 2022. "Turning on Dimensional Prominence in Decision Making: Experiments and a Model," Management Science, INFORMS, vol. 68(8), pages 6075-6099, August.

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    More about this item

    Keywords

    attention; focusing; bounded rationality; intertemporal choice; future bias; present bias; framing;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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