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The Importance of the Cognitive Environment for Intertemporal Choice

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  • Michael A. Kuhn

    ()
    (Department of Economics, University of California San Diego, 9500 Gilman Drive # 0508, La Jolla, CA 92093)

  • Peter Kuhn

    ()
    (Department of Economics, University of California Santa Barbara, 2127 North Hall, Santa Barbara, CA 93106-9210, USA)

  • Marie Claire Villeval

    (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)

Abstract

We experimentally manipulate two aspects of the cognitive environment — cognitive depletion and recent sugar intake — and estimate their effects on individuals’ time preferences in a way that allows us to identify the structural parameters of a simple (α,β,δ) intertemporal utility function for each person. We find that individuals exposed to a prior cognitive load, individuals who consumed a sugared drink and individuals who consumed a sugar-free drink all defer more income than a control group exposed to none of these conditions. Structural estimates show that all three effects are driven entirely by increases in the intertemporal substitution elasticity parameter (α). Together, our results suggest that at least for complex economic decisions like intertemporal financial choice, the ‘attention/focusing’ effect of both prior cognitively demanding activity and prior assignment of a primary reward can improve decision-making.

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Bibliographic Info

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 1316.

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Date of creation: 2013
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Handle: RePEc:gat:wpaper:1316

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Keywords: Time preferences; self-control; depletion; sucrose; experiment;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Rachel Riley & suboptimal choice
    by chris dillow in Stumbling and Mumbling on 2013-04-05 12:35:14
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Cited by:
  1. Todd McElroy & David L. Dickinson & Nathan Stroh, 2013. "The impact of glucose administration on Bayesian v. heuristic based choice," Working Papers 13-18, Department of Economics, Appalachian State University.

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