Identifying Present-Bias from the Timing of Choices

45 Pages Posted: 3 Jun 2019 Last revised: 20 Aug 2019

See all articles by Paul Heidhues

Paul Heidhues

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Philipp Strack

Yale, Department of Economics

Date Written: August 19, 2019

Abstract

Timing decisions are common: when to file your taxes, finish a referee report, or complete a task at work. We ask whether time preferences can be inferred when only task completion is observed. To answer this question, we analyze the following model: each period a decision maker faces the choice whether to complete the task today or to postpone it to later. Cost and benefits of task completion cannot be directly observed by the analyst, but the analyst knows that net benefits are drawn independently between periods from a time-invariant distribution and that the agent has time-separable utility. Furthermore, we suppose the analyst can observe the agent's exact stopping probability. We establish that for any agent with quasi-hyperbolic β,δ-preferences and given level of partial naivete, the probability of completing the task conditional on not having done it earlier increases towards the deadline. And conversely, for any given preference parameters β,δ and (weakly increasing) profile of task completion probability, there exists a stationary payoff distribution that rationalizes her behavior as long as the agent is either sophisticated or fully naive. An immediate corollary being that, without parametric assumptions, it is impossible to rule out time-consistency even when imposing an a priori assumption on the permissible long-run discount factor. We also provide an exact partial identification result when the analyst can, in addition to the stopping probability, observe the agent's continuation value.

Keywords: Timeinconsistency, Hyperbolic Discounting, Naivite, Sophistication, Identification, Task-Completion

Suggested Citation

Heidhues, Paul and Strack, Philipp, Identifying Present-Bias from the Timing of Choices (August 19, 2019). Available at SSRN: https://ssrn.com/abstract=3386017 or http://dx.doi.org/10.2139/ssrn.3386017

Paul Heidhues

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Philipp Strack (Contact Author)

Yale, Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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