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arXiv · 2407.14955

Temptation: Immediacy and certainty

J. Lucas Reddinger
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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 workday 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.

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J. Lucas Reddinger. 2024-07-20. Temptation: Immediacy and certainty. https://arxiv.org/abs/2407.14955

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