Risk as Excuses to Postpone Effort-Provision
49 Pages Posted: 20 Sep 2021
Date Written: September 18, 2021
The future is inherently more uncertain than the present. Existing literature has shown that people act impatiently or in a time-inconsistent manner at least partly because of their aversion to future risk. While such intuition could be fully captured by standard economic models, the current paper proposes a novel mechanism in which risk preferences interact with intertemporal choices---individuals may use risk as an excuse to postpone effort-provision. In a pre-registered laboratory experiment, participants evaluate risky prospects of workloads for today and those for the next week. Compared to when the valuation decisions involve no intertemporal tradeoff, when they do, individuals act more averse to present risk and less averse to future risk. In other words, they take more present-oriented actions under the veil of risks. Such patterns are more salient for men, for more forward-looking individuals, and for those who do not answer all three questions correctly in the cognitive reflection test (CRT). However, we do not find similar patterns when outcomes are monetary payoffs. By contrast, using a wiggle room task, we are able to find evidence supporting excused-driven information avoidance for both effort and money.
Keywords: motivated reasoning, intertemporal choice, risk preferences, information avoidance
JEL Classification: D91, D81, C91
Suggested Citation: Suggested Citation