The Importance of the Cognitive Environment for Intertemporal Choice
GATE Working Paper No. 1316
55 Pages
Posted: 5 Apr 2013
University of Oregon - Department of Economics
University of California, Santa Barbara - Department of Economics; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)
Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Department of Public Finance, University of Innsbruck
There 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:
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
