Pension Contribution as a Commitment Device: Evidence of Sophistication among Time-inconsistent Households
Sophisticated agents with self-control problems value commitment devices that constrain future choices. Using Australian household data I test whether these households value commitment devices in the form of illiquid pension contributions. Applying various probabilistic choice models, the results confirm the conjecture that households with problems of self-control are more likely to invest in illiquid pensions while less likely to hold very liquid forms of assets.
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