Temptation: Immediacy and certainty

Jonathan Reddinger

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: Is an option especially tempting when it is both immediate and certain? I test the effect of risk on the present-bias factor given quasi-hyperbolic discounting. In my experiment workers allocate about thirty to fifty minutes of real-effort tasks between two weeks.I study dynamic consistency by comparing choices made two days in advance of the work-day with choices made when work is imminent. My novel design permits estimation of present bias using a decision with a consequence that is both immediate and certain. I find greater present bias when the consequence is certain.This finding has implications for any economic decision involving a present-biased decision-maker, including labor contracting and consumer good pricing. I offer a methodological remedy for experimental economists.

Keywords: present bias; dynamic inconsistency; quasi-hyperbolic discounting; timepreferences; risk preferences; immediacy effect; certainty effect; experimental economics (search for similar items in EconPapers)
JEL-codes: C91 D80 D90 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2024-08
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Working Paper: Temptation: Immediacy and certainty (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1338

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