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Present Bias

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  • Anujit Chakraborty

Abstract

Present bias is the inclination to prefer a smaller present reward to a larger later reward, but reversing this preference when both rewards are equally delayed. Such behavior violates stationarity of temporal choices, and hence exponential discounting. This paper provides a weakening of the stationarity axiom that can accommodate present‐biased choice reversals. We call this new behavioral postulate Weak Present Bias and characterize the general class of utility functions that is consistent with it. We show that present‐biased preferences can be represented as those of a decision maker who makes her choices according to conservative present‐equivalents, in the face of uncertainty about future tastes.

Suggested Citation

  • Anujit Chakraborty, 2021. "Present Bias," Econometrica, Econometric Society, vol. 89(4), pages 1921-1961, July.
    • Handle: RePEc:wly:emetrp:v:89:y:2021:i:4:p:1921-1961
    DOI: 10.3982/ECTA16467
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    References listed on IDEAS

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