Concentration Bias and Intertemporal Choice

We conduct a laboratory experiment to study the effect of concentration bias on intertemporal choice at the BonnEconLab of the University of Bonn (and, potentially, at the CLER of the University of Cologne).

The main feature of our experimental setup are multiple pairwise intertemporal choices that participants make after reading computerized instructions and completing practice choices. In each intertemporal choice, subjects choose between two alternatives, Alternative A and Alternative B. Each alternative consists of two components:
• a real-effort work schedule that distributes real-effort tasks over up to 8 work periods in the future and is completed online by subjects using their computers at home;
• a remuneration to be paid after subjects successfully completed their work schedule; the remuneration consists of up to two parts: a donation to a good cause and a monetary payment.

In all choices, the remuneration is concentrated in a single period. In some choices, the work schedule is concentrated in one period and in others, the work schedule is dispersed over multiple periods. When designing choices such that standard discounting models assume that individuals should behave equally, we test whether subjects are willing to work more when work is dispersed over multiple days than when it is concentrated in a single period.

2019-06-24

2019-07-31

The study includes a single outcome variable: subjects’ indifference points in Part 2.

See experimental design

I. DATA COLLECTION

The experiment consists of 4 parts.

Part 1

Part 1 consists of 8 blocks of intertemporal choices. Each block consists of a sequence of 126 fixed intertemporal choices. Subjects complete the blocks in random order.
The contents and goal of the intertemporal choices within a block are as follows:
• Both alternatives, A and B, consist of work schedules that distribute positive numbers of real-effort tasks over all 8 work periods. Upon completion of the work schedule, according to both alternatives, a payment of 100 euros is transferred to subjects’ bank accounts and a donation to an NGO is made.
• The alternatives differ in the level of the donation and in the number of real-effort tasks in one of the work periods. This period is henceforth called the block-defining work period.
• The donation to the NGO is greater in A than in B for all decisions.
• The work schedule of Alternative A implies a greater number of real-effort tasks for the block-defining work period than the work schedule of Alternative B in all but one choice—in which they are the same. The work load in all 7 remaining work periods is the same in A and B.
• Alternative B is constant among all choices.
• Alternative A varies between the choices of a block only in the number of real-effort tasks in the block-defining work period.
• The intertemporal choices allow us to elicit subjects’ indifference points such that we know how many more real-effort tasks they are willing to complete in the block-defining work period in exchange for a greater donation in the end.
• Eliciting indifference points for each block is our primary goal of Part 1.
• Part 2 will directly depend on the indifference points elicited in Part 1. Subjects are unaware that their Part-1 choices affect their Part-2 choices to keep subjects properly incentivized to report their truthful indifference points in Part 1.
Blocks
• Between the 8 blocks, we vary the block-defining work period among all 8 work periods and the donation levels in the following way: Sorting the donation levels among the blocks, the donation level of Alternative A in a given decision block equals the donation level of Alternative B in the preceding decision block.

Part 2

Part 2 consists of one block of intertemporal choices. This block also consists of a list of 126 fixed intertemporal choices.
• Again, both alternatives, A and B, consist of work schedules that distribute positive numbers of real-effort tasks over all 8 work periods. Again, upon completion of the respective work schedule, a payment of 100 euros is transferred to subjects’ bank accounts and a donation to an NGO is made.
• The alternatives depend on subjects’ Part-1 indifference points and on their (between-subjects) treatment condition. Details of the conditions are described below.

Part 3

Part 3 consists of 4 blocks of intertemporal choices. Each block consists of a list of 126 fixed intertemporal choices that span up to eight work dates. Subjects complete the blocks in the following order.
Block “Unbalanced 8”:
• Subjects face repeated pairwise choices between an Alternative A that consists of a work schedule that includes positive work load on all 8 dates and an Alternative B that consists of not working at all and not receiving any remuneration. The remuneration for Alternative A varies across choices so that we can determine the amount of money that makes a subject indifferent between choosing A (working on 8 dates for a positive remuneration) and B (no work and no remuneration).
• The indifference point elicited in Block “Unbalanced 8” is the first of the two components of the measure we seek to construct from Part 3.

Block “Balanced 1”
• Subjects face repeated pairwise choices between an Alternative A that consists of a work schedule that includes positive work load on 1 date and an Alternative B that consists of not working at all and receiving a positive monetary payment as remuneration. The remuneration for Alternative A varies across choices so that we can determine the amount of money that makes a subject indifferent between choosing A (working on a single date for a potentially greater remuneration) and B (no work for a particular remuneration).
• This block is added to maintain a structure

Block “Unbalanced 7”:

• Subjects face repeated pairwise choices between an Alternative A that consists of a work schedule that includes positive work load on 7 out of 8 dates and an Alternative B that consists of not working at all and not receiving any remuneration. The remuneration for Alternative A varies across choices so that we can determine the amount of money that makes a subject indifferent between choosing A (working on 7 dates for a positive remuneration) and B (no work and no remuneration).
• The alternatives A used in “Unbalanced 8” are like the alternatives A used in “Unbalanced 7” except for the work load in the 8th period that is missing in the alternatives A of “Unbalanced 7”.
• The indifference point elicited in “Unbalanced 7” is used as the fixed remuneration of alternatives B in “Balanced 2”.
Block “Balanced 2”
• Subjects face repeated pairwise choices between an Alternative A that consists of a work schedule that includes positive work load on the 8th date and an Alternative B that consists of not working at all and receiving a positive monetary payment as remuneration that equals subjects’ indifference point from “Unbalanced 7”.
• The indifference point elicited in Block “Balanced 2” is the second of the two components of the measure we seek to construct from Part 3.

Part-3 Measure: Aggregation neglect
• We construct the measure aggregation neglect by taking the difference between the indifference point from “Balance 2” and the indifference point from “Unbalanced 8”.
• Positive values of aggregation neglect imply that subjects require a lower amount for working the same number of tasks on the 8th date if that work load is embedded in a work schedule that involves work on 7 additional period rather than no additional work.
• We call this aggregation neglect because we interpret this as evidence that subjects have difficulties to aggregate the disutility stemming from consequences that are dispersed over multiple periods.

Part 4

In Part 4, subjects submit demographic information and complete a Raven IQ test.

II. PROCEDURAL NOTE
In Part 1, Part 2, and Part 3, the order of the intertemporal choices within a block follows the following procedure:
• In order to reduce time and conserve subjects’ mental energy, subjects actively make only up to 9 decisions per block. We impose consistency (i.e., single switching and therefore unambiguously determined indifference points) such that subjects make the remaining decisions passively based on their active choices:
• If subjects actively choose to accept a greater donation for a certain number of real-effort tasks, they passively choose to accept the greater donation also for fewer real-effort tasks.
• If subjects actively did not accept a greater donation for a certain number of real-effort tasks, they passively did not accept the greater donation for an even greater number of real-effort tasks.
• The first intertemporal choice within a block that subjects have to make actively is randomly chosen among all 126 choices.
• The remaining choices are selected by the computer to minimize the average number of active choices.

III. TREATMENTS

Treatment Main
In each decision block of Part 1, there is exactly one block-defining work period for which subjects have to trade off an increase in work load with an increase in the amount donated to the NGO. In treatment Main, subjects trade off an increase in the work load in all work periods for an increase in the donation made to the NGO.
More precisely, Alternative B is still constant, and its work schedule is the same as that of the Alternatives B faced in Part 1. Simultaneously, Alternative B in Part 2 goes along with a donation to the NGO that is identical to the minimal donation included in all Alternatives B in Part 1. Alternative A, by contrast, goes along with a donation that is identical to the maximal donation across all Alternatives A in Part 1. Crucially, the work plans of the Alternatives A are created such that they include the work plan that is constructed from all eight indifference points elicited in Part 1. Let us refer to this particular work plan as the “reference work plan.” In all other choices, Alternative A includes a strictly greater or smaller number of tasks in each period.
This means that standard discounted utility would predict for the treatment Main in Part 2 that subjects are exactly indifferent between Alternative A for the “reference work plan” and Alternative B. The model by Kőszegi & Szeidl QJE 2013), by contrast, predicts that subjects choose Alternative A even for amounts of work that are greater in every period than the indifference points elicited in Part 1 if focusing is strong enough.

Treatment Control
In treatment Control, one randomly selected choice from Part 1 is repeated. This allows us to detect—and control for—a potential time trend in subjects’ choices, which may be brought about by the fact that participants make similar decisions multiple times.

Treatments are randomized within sessions of up to 24 subjects on the individual level. We stratify treatment assignment among subjects within a session that do not meet the exclusion criterion according to their average indifference points of Part 1. We do so by computing subjects’ average indifference point of Part 1, building an average indifference point ranking and randomizing pairs of direct-ranking neighbors into Main or Control.

Individual level

No

100 subjects in the treatment Main yield one indifference point each
100 subjects in the treatment Control yield one indifference point each

100 subjects in the treatment Main yield one indifference point each 100 subjects in the treatment Control yield one indifference point each

100 subjects in the treatment Main yield one indifference point each
100 subjects in the treatment Control yield one indifference point each