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Trial Title Temptation: Immediacy and Certainty Temptation: Immediacy and certainty
Abstract Is an option is especially tempting when it is both immediate and certain? To study the effect of risk on present bias, I conduct an online experiment in which workers allocate about thirty minutes of real-effort tasks between two weeks. I compare choices made two days before the first workday against choices made when work is imminent. In baseline treatments, one choice is randomly implemented; meanwhile, one treatment implements a particular allocation with certainty. By assuming that effort costs are not affected by the mechanism (and thus independent of risk preferences), my novel design permits estimation of present bias using a decision with a consequence both immediate and certain. I find the average intensity of present bias is far greater under certainty than under risk. I find no evidence that present bias is more pervasive among individuals, suggesting instead that present-biased individuals become more myopic. 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. Finally I offer a methodological remedy for experimental economists.
JEL Code(s) D03, D81, D90 C91, D80, D90
Last Published September 10, 2021 01:38 AM August 11, 2024 05:17 PM
Final Sample Size: Number of Clusters (Unit of Randomization) 220 subjects gave consent to participate.
Was attrition correlated with treatment status? No
Final Sample Size: Total Number of Observations 180 subjects completed all three sessions.
Final Sample Size (or Number of Clusters) by Treatment Arms 30 subjects in baseline, 32 in Risky Day Certain Rate, 60 in Certain Day Risky Rate, 58 in Certain Day Certain Rate.
Public Data URL https://doi.org/10.17605/OSF.IO/ZE3WJ
Is there a restricted access data set available on request? No
Program Files Yes
Program Files URL https://doi.org/10.17605/OSF.IO/ZE3WJ
Is data available for public use? No Yes
Experimental Design (Public) Subjects must complete an intake questionnaire that tests comprehension of the experimental instructions; subjects must answer all questions correctly to be enrolled in the trial. On Day 1 (e.g., Monday of Week 1), subjects are asked to allocate approximately 30 minutes of work between Day 2 (e.g., Wednesday of Week 1) and Day 3 (e.g., Wednesday of Week 2). On Day 2, subjects are again asked to allocate work between Day 2 and Day 3. For each subject, an independent fair coin toss determines whether decisions from Day 1 or Day 2 are implemented. If a subject is assigned to the “Uncertain-Day” treatment, she learns the result of this coin toss after her decisions on Day 2. If a subject is assigned to the “Certain-Day” treatment, she learns the result of this coin toss before her decisions on Day 2. On each day that decisions are made, subjects are asked to allocate a fixed present value budget of real-effort tasks between Days 2 and 3. Subjects make allocation decisions for each of five gross interest rates R ∈ {0.5, 0.75, 1, 1.25, 1.5}. If a subject is assigned to the “Uncertain-List” treatment, after she makes all of her decisions, one of her decisions from the selected day is chosen at random with uniform probability to be implemented. If a subject is assigned to the “Certain-List” treatment, her decision from the selected day for the gross interest rate R = 1.25 is chosen with certainty to be implemented. Each subject is assigned to a “Day” treatment and a “List” treatment, resulting in a two-by-two factorial design. Each subject is fully informed of the procedures and mechanisms used in her assigned treatment. Subjects must complete an intake questionnaire that tests comprehension of the experimental instructions; subjects must answer all questions correctly to be enrolled in the trial. On day 0 (e.g., Monday of week 1), subjects are asked to allocate approximately 30 minutes of work between day 2 (e.g., Wednesday of week 1) and Day 9 (e.g., Wednesday of week 2). On Day 2, subjects are again asked to allocate work between day 2 and day 9. For each subject, an independent fair coin toss determines whether decisions from day 0 or day 2 are implemented. If a subject is assigned to the Risky Day treatment, she learns the result of this coin toss after her decisions on day 2. If a subject is assigned to the Certain Day treatment, she learns the result of this coin toss before her decisions on day 2. On each day that decisions are made, subjects are asked to allocate a fixed present value budget of real-effort tasks between days 2 and 9. Subjects make allocation decisions for each of five gross interest rates R ∈ {0.5, 0.75, 1, 1.25, 1.5}. If a subject is assigned to the Risky Rate treatment, after she makes all of her decisions, one of her decisions from the selected day is chosen at random with uniform probability to be implemented. If a subject is assigned to the Certain Rate treatment, her decision from the selected day for the gross interest rate R = 1.25 is chosen with certainty to be implemented. Each subject is assigned to a Day treatment and a Rate treatment, resulting in a two-by-two factorial design. Each subject is fully informed of the procedures and mechanisms used in her assigned treatment.
Sample size (or number of clusters) by treatment arms Certain-Day-Certain-List: 64 subjects. Certain-Day-Uncertain-List: 64 subjects. Uncertain-Day-Certain-List: 32 subjects. Uncertain-Day-Uncertain-List: 32 subjects. Certain Day, Certain Rate: 64 subjects. Certain Day, Risky Rate: 64 subjects. Risky Day, Certain Rate: 32 subjects. Risky Day, Risky Rate: 32 subjects.
Additional Keyword(s) intertemporal choice, time preferences, risk preferences, dynamic inconsistency, present bias, nonstationarity, immediacy effect, certainty effect, common difference effect, common ratio effect, non-expected utility, Allais paradox present bias, dynamic inconsistency, quasi-hyperbolic discounting, time preferences, risk preferences, immediacy effect, certainty effect, experimental economics
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Papers

Field Before After
Paper 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. Finally I offer a methodological remedy for experimental economists.
Paper Citation Reddinger, J. Lucas. "Temptation: Immediacy and Certainty". arXiv [Econ.GN], 2024, http://arxiv.org/abs/2407.14955.
Paper URL https://doi.org/10.48550/arXiv.2407.14955
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