Concentration Bias in Intertemporal Choice

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 concentrate...

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Bibliographic Details
Published inThe Review of economic studies Vol. 89; no. 3; pp. 1314 - 1334
Main Authors Dertwinkel-Kalt, Markus, Gerhardt, Holger, Riener, Gerhard, Schwerter, Frederik, Strang, Louis
Format Journal Article
LanguageEnglish
Published Oxford University Press 07.05.2022
Subjects
Future bias
Present bias
D01
Focusing
Attention
Framing
Bounded rationality
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Summary: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.
ISSN:0034-6527
1467-937X
DOI:10.1093/restud/rdab043