Youth and inexperience: Dynamic inconsistency among emerging adults

Brian Gibbons and Julia Paxton

No 2015-19, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Why do some people think they will behave differently in the future? Building on research on dynamic inconsistency and age related preferences, this paper introduces the concept that inconsistent intertemporal preferences are directly related to age. In previous studies, standard socioeconomic variables such as age have had mixed results in predicting hyperbolic discounting (a behavior that consists of impatience now but projected patience in the future). By incorporating both demographic and behavioral variables, a clearer picture emerges. The findings from observations of a large sample of college graduates indicate that emerging adults are more likely to exhibit hyperbolic discounting behavior than adults over the age of 30. Among emerging adult respondents, lower incomes and more naïve self-assessments are determinants of hyperbolic discounting behavior. Recognizing demographic trends is critical since studies show that hyperbolic discounting affects financial and planning decisions and that specially designed tools may help hyperbolic discounters follow through with plans (Ashraf, et. al. 2006).

Keywords: Hyperbolic discounting; Emerging adults; Generation Y; Dynamic inconsistency; Intertemporal preferences (search for similar items in EconPapers)
JEL-codes: D1 D9 J1 (search for similar items in EconPapers)
Date: 2015
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https://www.econstor.eu/bitstream/10419/107773/1/820307289.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201519

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