Concentration Bias in Intertemporal Choice

57 Pages Posted: 16 Apr 2021

See all articles by Markus Dertwinkel-Kalt

Markus Dertwinkel-Kalt

Frankfurt School of Finance & Management

Holger Gerhardt

Max Delbrück Center for Molecular Medicine in the Helmholtz Association (MDC) - Integrative Vascular Biology Laboratory

Gerhard Riener

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

Frederik Schwerter

University of Bonn

Louis Strang

University of Cologne

Date Written: 2021

Abstract

Many intertemporal trade-offs are unbalanced: while the advantages of options are concentrated in a few periods, the disadvantages are dispersed over numerous periods. We provide novel experimental evidence for “concentration bias”, the tendency to overweight advantages that are concentrated in time. Subjects commit to too much overtime work that is dispersed over multiple days in exchange for a bonus that is concentrated in time: concentration bias increases subjects’ willingness to work by 22.4% beyond what standard discounting models could account for. In additional conditions and a complementary experiment involving monetary payments, we study the mechanisms behind concentration bias and demonstrate the robustness of our findings.

JEL Classification: D010

Suggested Citation

Dertwinkel-Kalt, Markus and Gerhardt, Holger and Riener, Gerhard and Schwerter, Frederik and Strang, Louis, Concentration Bias in Intertemporal Choice (2021). CESifo Working Paper No. 9011, Available at SSRN: https://ssrn.com/abstract=3830216

Markus Dertwinkel-Kalt (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt, 60322
Germany

Holger Gerhardt

Max Delbrück Center for Molecular Medicine in the Helmholtz Association (MDC) - Integrative Vascular Biology Laboratory ( email )

Germany

Gerhard Riener

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

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Frederik Schwerter

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Louis Strang

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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