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How soon is now? Evidence of present bias from convex time budget experiments

Author

Listed:
  • Uttara Balakrishnan

    (IMPAQ International)

  • Johannes Haushofer

    (Princeton University
    Busara Center for Behavioral Economics)

  • Pamela Jakiela

    (Center for Global Development)

Abstract

We conduct a laboratory experiment in Kenya in which we elicit time and risk preference parameters from 494 participants, using convex time budgets and tightly controlling for transaction costs. Using the Kenyan mobile money system M-Pesa to make real-time transfers to subjects’ phones , we vary whether same-day payments are made immediately after the experimental session or at the close of the business day. We find strong evidence of present bias, with estimates of the present bias parameter ranging from 0.902 to 0.924—but only when same-day payments are made immediately after the experiment.

Suggested Citation

  • Uttara Balakrishnan & Johannes Haushofer & Pamela Jakiela, 2020. "How soon is now? Evidence of present bias from convex time budget experiments," Experimental Economics, Springer;Economic Science Association, vol. 23(2), pages 294-321, June.
  • Handle: RePEc:kap:expeco:v:23:y:2020:i:2:d:10.1007_s10683-019-09617-y
    DOI: 10.1007/s10683-019-09617-y
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    Cited by:

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    2. Taisuke Imai & Tom A Rutter & Colin F Camerer, 2021. "Meta-Analysis of Present-Bias Estimation using Convex Time Budgets," Economic Journal, Royal Economic Society, vol. 131(636), pages 1788-1814.
    3. James Andreoni & Christina Gravert & Michael A. Kuhn & Silvia Saccardo & Yang Yang, 2018. "Arbitrage Or Narrow Bracketing? On Using Money to Measure Intertemporal Preferences," NBER Working Papers 25232, National Bureau of Economic Research, Inc.
    4. Backes-Gellner, Uschi & Herz, Holger & Kosfeld, Michael & Oswald, Yvonne, 2021. "Do preferences and biases predict life outcomes? Evidence from education and labor market entry decisions," European Economic Review, Elsevier, vol. 134(C).
    5. Dertwinkel-Kalt, Markus & Köster, Mats & Peiseler, Florian, 2019. "Attention-driven demand for bonus contracts," European Economic Review, Elsevier, vol. 115(C), pages 1-24.
    6. Brañas-Garza, Pablo & Jorrat, Diego & Espín, Antonio M. & Sanchez, Angel, 2020. "Paid and hypothetical time preferences are the same: Lab, field and online evidence," MPRA Paper 103660, University Library of Munich, Germany.
    7. Shilpa Aggarwal & Rebecca Dizon-Ross & Ariel D. Zucker, 2020. "Incentivizing Behavioral Change: The Role of Time Preferences," NBER Working Papers 27079, National Bureau of Economic Research, Inc.
    8. Felix Koelle & Lukas Wenner, 2018. "Present-Biased Generosity: Time Inconsistency across Individual and Social Contexts," Discussion Papers 2018-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    9. Krčál, Ondřej & Peer, Stefanie & Staněk, Rostislav, 2021. "Can time-inconsistent preferences explain hypothetical biases?," Economics of Transportation, Elsevier, vol. 25(C).
    10. Markus Dertwinkel-Kalt & Mats Köster & Florian Peiseler, 2019. "Attention-driven demand for bonus contracts," CESifo Working Paper Series 7539, CESifo.
    11. Chopra, Felix & Eisenhauer, Philipp & Falk, Armin & Graeber, Thomas W, 2021. "Intertemporal Altruism," IZA Discussion Papers 14059, Institute of Labor Economics (IZA).
    12. Lukas Kiessling & Shyamal Chowdhury & Hannah Schildberg-Hörisch & Matthias Sutter, 2021. "Parental Paternalism and Patience," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2021_03, Max Planck Institute for Research on Collective Goods.
    13. Felix Koelle & Thomas Lauer, 2018. "Cooperation, Discounting, and the Effects of Delayed Costs and Benefits," Discussion Papers 2018-10, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    14. Rachel Cassidy, 2018. "Are the poor so present-biased?," IFS Working Papers W18/24, Institute for Fiscal Studies.
    15. Alexis Direr, 2020. "Bringing present bias back to the present," Working Papers hal-02133525, HAL.
    16. Kölle, Felix & Wenner, Lukas, 2019. "Time-Inconsistent Generosity: Present Bias across Individual and Social Contexts," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203505, Verein für Socialpolitik / German Economic Association.
    17. Felix Kölle & Thomas Lauer, 2020. "Understanding Cooperation in an Intertemporal Context," ECONtribute Discussion Papers Series 046, University of Bonn and University of Cologne, Germany.
    18. Holden, Stein T. & Sommervoll, Dag Einar & Tilahun, Mesfin, 2020. "Mental Zooming as Variable Asset Integration in Inter-temporal Choice," CLTS Working Papers 7/20, Norwegian University of Life Sciences, Centre for Land Tenure Studies.
    19. Haushofer, Johannes & Jain, Prachi & Musau, Abednego & Ndetei, David, 2021. "Stress may increase choice of sooner outcomes, but not temporal discounting," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 377-396.
    20. Rachel Cassidy, 2018. "Are the poor so present-biased?," CSAE Working Paper Series 2018-19, Centre for the Study of African Economies, University of Oxford.
    21. Nathan Fiala, 2017. "Business is Tough, but Family is Worse: Household Bargaining and Investment in Microenterprises in Uganda," Working papers 2017-05, University of Connecticut, Department of Economics.
    22. Ondřej Krčál & Stefanie Peer & Rostislav Staněk, 2021. "Can time-inconsistent preferences explain hypothetical biases?," MUNI ECON Working Papers 2021-01, Masaryk University.

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    More about this item

    Keywords

    Discount rate; Present bias; Experiment; Mobile money;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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