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Inconsistent Time Preferences and On-the-job Search - When it Pays to be Naive

Matthias Fahn () and Regina Seibel ()
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Regina Seibel: University of Zurich, https://www.econ.uzh.ch/en/people/graduatestudents/seibel.html

No 2019-09, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: We study optimal employment contracts for present-biased employees who can conduct on-the-job search. Presuming that firms cannot offer long-term contracts, we find that individuals who are naive about their present bias will actually be better off than sophisticated or time-consistent individuals. Moreover, they search more, which partially counteracts the inefficiencies caused by their present bias.

Keywords: Present bias; on-the-job search (search for similar items in EconPapers)
JEL-codes: D21 D83 D90 J31 J32 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-bec, nep-cta, nep-mic and nep-upt
Note: English
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2019_09

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