1999 DoingItNowOrLater

• (O'Donoghue & Rabin, 1999) ⇒ Ted O'Donoghue, and Matthew Rabin. (1999). “Doing It Now Or Later.” In: American Economic Review.

Subject Headings: Self-Control Problem, Present Bias.

Cited By

• http://scholar.google.com/scholar?q=%221999%22+Doing+It+Now+Or+Later

Quotes

Abstract

We examine self-control problems -- modeled as time-inconsistent, present-biased preferences -- in a model where a person must do an activity exactly once. We emphasize two distinctions: Do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate - - do too soon - - immediate-reward activities. Sophistication mitigates procrastination, but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.

Introduction

People are impatient - they like to experience rewards soon and to delay costs until later. Economists almost always capture impatience by assuming that people discount streams of utility over time exponentially. Such preferences are time-consistent: A person's relative preference for well-being at an earlier date over a later date is the same no matter when she is asked.

Casual observation, introspection, and psychological research all suggest that the assumption of time consistency is importantly wrong. It ignores the human tendency to grab reviews how the economics profession evolved from perceiving exponential discounting as a useful, ad hoc approximation of intertemporal-choice behavior, to perceiving it as a fun-immediate rewards and to avoid immediate costs in a way that our long-run selves do not appreciate. For example, when presented a choice between doing seven hours of an unpleasant activity on April 1 versus eight hours on April 15, if asked on February 1 virtually everyone would prefer the seven hours on April 1. But come April 1, given the same choice, most of us are apt to put off the work until April 15. We call such tendencies present-biased preferences: When considering trade-offs between two future moments, present-biased preferences give stronger relative weight to the earlier moment as it gets closer.

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References

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	Author	volume	Date Value	title	type	journal	titleUrl	doi	note	year
1999 DoingItNowOrLater	Ted O'Donoghue Matthew Rabin			Doing It Now Or Later						1999