Download this Paper Open PDF in Browser

The Importance of the Cognitive Environment for Intertemporal Choice

GATE Working Paper No. 1316

55 Pages Posted: 5 Apr 2013  

Michael Kuhn

University of Oregon - Department of Economics

Peter Kuhn

University of California, Santa Barbara - Department of Economics; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Department of Public Finance, University of Innsbruck

Multiple version iconThere are 2 versions of this paper

Date Written: April 3, 2013

Abstract

We experimentally manipulate two aspects of the cognitive environment - cognitive depletion and recent sugar intake - and estimate their effects on individuals’ time preferences in a way that allows us to identify the structural parameters of a simple (α,β,δ) intertemporal utility function for each person. We find that individuals exposed to a prior cognitive load, individuals who consumed a sugared drink and individuals who consumed a sugar-free drink all defer more income than a control group exposed to none of these conditions. Structural estimates show that all three effects are driven entirely by increases in the intertemporal substitution elasticity parameter (α). Together, our results suggest that at least for complex economic decisions like intertemporal financial choice, the ‘attention/focusing’ effect of both prior cognitively demanding activity and prior assignment of a primary reward can improve decision-making.

Keywords: Time preferences, self-control, depletion, sucrose, experiment

JEL Classification: C91, D90

Suggested Citation

Kuhn, Michael and Kuhn, Peter and Villeval, Marie Claire, The Importance of the Cognitive Environment for Intertemporal Choice (April 3, 2013). GATE Working Paper No. 1316. Available at SSRN: https://ssrn.com/abstract=2244236 or http://dx.doi.org/10.2139/ssrn.2244236

Michael Kuhn (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

HOME PAGE: http://pages.uoregon.edu/mkuhn

Peter J. Kuhn

University of California, Santa Barbara - Department of Economics ( email )

North Hall 3036
Santa Barbara, CA 93106
United States
(805) 893-3666 (Phone)
(805) 893-8830 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)

HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Department of Public Finance, University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Paper statistics

Downloads
101
Rank
214,089
Abstract Views
1,234