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Procrastination, Self-Imposed Deadlines and Other Commitment Devices

  • Kyle Hyndman

    ()

    (SMU)

  • Alberto Bisin

    ()

    (NYU)

In this paper we model a decision maker who must exert costly effort to complete a single task by a fixed deadline. Effort costs evolve stochastically in continuous time. The decision maker will then optimally wait to exert effort until costs are less than a given threshold, the solution to an optimal stopping time problem. We derive the solution to this model for three cases: (1) time consistent decision makers, (2) naive hyperbolic discounters and (3) sophisticated hyperbolic discounters. Sophisticated hyperbolic discounters behave as if they were time consistent but instead have a smaller reward for completing the task. We show that sophisticated decision makers will often self-impose a deadline to ensure early completion of the task. Other forms of commitment are also discussed.

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File URL: ftp://ftp1.economics.smu.edu/WorkingPapers/2009/HYNDMAN/HYNDMAN-2009-03.pdf
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Paper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0904.

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Date of creation: Mar 2009
Date of revision:
Handle: RePEc:smu:ecowpa:0904
Contact details of provider: Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Phone: 214-768-2715
Fax: 214-768-1821
Web page: http://www.smu.edu/economics

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  1. Nicholas Burger & Gary Charness & John Lynham, 2008. "Three Field Experiments on Procrastination and Willpower," Levine's Working Paper Archive 122247000000002399, David K. Levine.
  2. Christopher Harris & David Laibson, 2001. "Instantaneous Gratification," NajEcon Working Paper Reviews 625018000000000267, www.najecon.org.
  3. O'Donoghue, Ted & Rabin, Matthew, 1997. "Doing It Now or Later," Department of Economics, Working Paper Series qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  5. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, 01.
  6. Markus K. Brunnermeier & Filippos Papakonstantinou & Jonathan A. Parker, 2008. "An Economic Model of the Planning Fallacy," NBER Working Papers 14228, National Bureau of Economic Research, Inc.
  7. Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
  8. Maria Saez-Marti & Anna Sjögren, 2007. "Deadlines and Distractions," IEW - Working Papers 347, Institute for Empirical Research in Economics - University of Zurich.
  9. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
  10. Jianjun Miao, 2008. "Option exercise with temptation," Economic Theory, Springer, vol. 34(3), pages 473-501, March.
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