Complexity and Time

Benjamin Enke, Thomas Graeber and Ryan Oprea

No 10327, CESifo Working Paper Series from CESifo

Abstract: We provide experimental evidence that core intertemporal choice anomalies – including extreme short-run impatience, structural estimates of present bias, hyperbolicity and transitivity violations – are driven by complexity rather than time or risk preferences. First, all anomalies also arise in structurally similar atemporal decision problems involving valuation of iteratively discounted (but immediately paid) rewards. These computational errors are strongly predictive of intertemporal decisions. Second, intertemporal choice anomalies are highly correlated with indices of complexity responses including cognitive uncertainty and choice inconsistency. We show that model misspecification resulting from ignoring behavioral responses to complexity severely inflates structural estimates of present bias.

Keywords: complexity; hyperbolic discounting; present bias; bounded rationality; noise; cognitive uncertainty (search for similar items in EconPapers)
JEL-codes: C91 D91 G00 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-evo, nep-exp, nep-hme and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10327

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