Present Bias and Collective Dynamic Choice in the Lab

Abstract

We study collective decisions by time-discounting individuals choosing a common consumption stream. We show that with any heterogeneity in time preferences, utilitarian aggregation necessitates a present bias. In lab experiments three quarters of `social planners' exhibited present biases, and less than two percent were time consistent. Roughly a third of subjects acted as if they were pure utilitarians, and the rest chose as if they also had varying degrees of distributional concerns.

Keywords: collective decisions, time inconsistency, collective utility functions, consumption plans, representative agents, voting, voting rules, majority voting, transitivity, hyperbolic discounting, present bias

JEL Classification: D72, D71, D03, D11, E24