Pension Contributions 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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