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The Importance of the Cognitive Environment for Intertemporal Choice

Listed author(s):
  • Michael A. Kuhn

    (Department of Economics, University of California - UC San Diego - University of California, San Diego)

  • Peter Kuhn

    (Department of Economics, University of California - University of California, Santa Barbara)

  • Marie Claire Villeval

    ()

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)

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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Paper provided by HAL in its series Post-Print with number halshs-00861232.

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Date of creation: 06 Jun 2013
Publication status: Published in Inauguration du laboratoire expérimental de l'université d'Edinburgh (BLUE), Edinburgh, 6 et 7 juin 2013, Jun 2013, Edinburg, United Kingdom
Handle: RePEc:hal:journl:halshs-00861232
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00861232
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
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  1. John Beshears & James Choi & David Laibson & Brigitte Madrian, 2008. "Simplification and Saving," Yale School of Management Working Papers amz2392, Yale School of Management.
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  8. David L. Dickinson & Todd McElroy, 2009. "Rationality around the clock. Sleep and time-of-day effects on guessing game responses," Working Papers 09-17, Department of Economics, Appalachian State University.
  9. Ryder, Harl E., 1985. "Heterogeneous time preferences and the distribution of wealth," Mathematical Social Sciences, Elsevier, vol. 9(1), pages 63-76, February.
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