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Working Over Time: Dynamic Inconsistency in Real Effort Tasks

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  • Ned Augenblick
  • Muriel Niederle
  • Charles Sprenger

Abstract

Experimental tests of dynamically inconsistent time preferences have largely relied on choices over time-dated monetary rewards. Several recent studies have failed to find the standard patterns of time inconsistency. However, such monetary studies contain often discussed confounds. In this paper, we sidestep these confounds and investigate choices over consumption (real effort) in a longitudinal experiment. We pair those effort choices with a companion monetary discounting study. We confirm very limited time inconsistency in monetary choices. However, subjects show considerably more present bias in effort. Furthermore, present bias in the allocation of work has predictive power for demand of a meaningfully binding commitment device. Therefore our findings validate a key implication of models of dynamic inconsistency, with corresponding policy implications.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18734.

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Date of creation: Jan 2013
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Handle: RePEc:nbr:nberwo:18734

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  1. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  2. Gourinchas, P.O. & Parker, J.A., 1997. "Consumption Over the Life Cycle," Working papers 9722, Wisconsin Madison - Social Systems.
  3. Alexander L. Brown & Colin F. Camerer & Zhikang Eric Chua, 2006. "Learning and Visceral Temptation in Dynamic Savings Experiments," Levine's Bibliography 321307000000000048, UCLA Department of Economics.
  4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  5. Cagetti, Marco, 2003. "Wealth Accumulation over the Life Cycle and Precautionary Savings," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 339-53, July.
  6. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  7. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  8. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-84, September.
  9. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
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Cited by:
  1. James Andreoni & Michael A. Kuhn & Charles Sprenger, 2013. "On Measuring Time Preferences," NBER Working Papers 19392, National Bureau of Economic Research, Inc.
  2. Pascaline Dupas & Jonathan Robinson, 2013. "Daily Needs, Income Targets and Labor Supply: Evidence from Kenya," NBER Working Papers 19264, National Bureau of Economic Research, Inc.
  3. Cockx, Bart & Ghirelli, Corinna & Van der Linden, Bruno, 2014. "Is it socially efficient to impose job search requirements on unemployed benefit claimants with hyperbolic preferences?," Journal of Public Economics, Elsevier, vol. 113(C), pages 80-95.

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