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Intertemporal Decision Making with Present Biased Preferences

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  • Zafer Akin

Abstract

I study the behavior of individuals with present biased preferences who are involved in costly, long-run projects. By using generic cost and reward functions, I characterize the behaviors of the sophisticated, partial naive and naive types. It is shown that there may arise cases where naives needlessly put effort on projects they never complete. Moreover, in endogenous total cost projects, the naive types always end up completing projects of lesser quality than originally intended. By introducing a bonus motive, it is shown that agents with higher self-control problems should be given a higher bonus to prevent inefficient procrastination. I, then, characterize the behavior of partially naives who potentially learn self-preferences. It is found that without learning self-preferences, partial naives behave either like sophisticates or naives depending on the level of naivete; with learning, if the learning pace is fast enough, procrastination until the deadline does not occur.
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Suggested Citation

  • Zafer Akin, 2010. "Intertemporal Decision Making with Present Biased Preferences," Working Papers 1001, TOBB University of Economics and Technology, Department of Economics.
  • Handle: RePEc:tob:wpaper:1001
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    References listed on IDEAS

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    Cited by:

    1. Akin, Zafer & Yavas, Abdullah, 2023. "Elicited Time Preferences and Behavior in Long-Run Projects," MPRA Paper 117133, University Library of Munich, Germany.
    2. David Patiño & Francisco Gómez-García, 2019. "Do Quasi-Hyperbolic Preferences Explain Academic Procrastination? An Empirical Evaluation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 230(3), pages 95-124, June.
    3. Yixuan Shi, 2022. "Dynamic Volunteer’s Dilemma with Procrastinators," Working Papers tax-mpg-rps-2022-17, Max Planck Institute for Tax Law and Public Finance.
    4. Altınok, Ahmet & Yılmaz, Murat, 2018. "Dynamic voluntary contribution to a public project under time inconsistency," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 114-140.
    5. Yang Wang & Frank A. Sloan, 2018. "Present bias and health," Journal of Risk and Uncertainty, Springer, vol. 57(2), pages 177-198, October.
    6. Emanuele Millemaci & Robert J. Waldmann, 2016. "Present-Biased Preferences and Money Demand," De Economist, Springer, vol. 164(2), pages 187-207, June.
    7. Marco A. Haan & Dominic Hauck, 2023. "Games with possibly naive present-biased players," Theory and Decision, Springer, vol. 95(2), pages 173-203, August.
    8. Yılmaz, Murat, 2013. "Repeated moral hazard with a time-inconsistent agent," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 70-89.

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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