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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| Published in | The Review of economic studies Vol. 89; no. 3; pp. 1314 - 1334 |
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| Main Authors | , , , , |
| Format | Journal Article |
| Language | English |
| Published |
Oxford University Press
07.05.2022
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| Abstract | 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. |
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| AbstractList | 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. |
| Author | Dertwinkel-Kalt, Markus Schwerter, Frederik Strang, Louis Gerhardt, Holger Riener, Gerhard |
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| Copyright | The Author(s) 2021. Published by Oxford University Press on behalf of The Review of Economic Studies Limited. 2021 |
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| Issue | 3 |
| Keywords | Future bias Present bias D01 Focusing Attention Framing Bounded rationality |
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