Valuation Uncertainty, Caution, and Present Bias

Abstract

We demonstrate that uncertainty in valuing delayed rewards, coupled with caution, could result in present bias. In two theory-driven pre-registered experiments, we measured subjects' present bias and valuation uncertainty toward timed rewards. Consistent with our theoretical analysis, higher valuation uncertainty correlated with stronger present bias for monetary rewards. For non-monetary timed rewards, as subjects exhibited valuation uncertainty regarding the present monetary equivalents of both immediate and delayed rewards, they showed weaker present bias. Importantly, valuation uncertainty also related to the front-end delay effect, contrary to Bayesian cognitive noise models. These findings remain robust after controlling for the perceived risk of receiving future payments and ambiguity attitudes.

Keywords: Valuation uncertainty, caution, present bias, the front-end delay effect, randomization, non-monetary rewards