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Complexity and Time

Author

Listed:
  • Benjamin Enke
  • Thomas Graeber
  • Ryan Oprea

Abstract

We provide experimental evidence that core intertemporal choice anomalies – including extreme short-run impatience, structural estimates of present bias, hyperbolicity and transitivity violations – are driven by complexity rather than time or risk preferences. First, all anomalies also arise in structurally similar atemporal decision problems involving valuation of iteratively discounted (but immediately paid) rewards. These computational errors are strongly predictive of intertemporal decisions. Second, intertemporal choice anomalies are highly correlated with indices of complexity responses including cognitive uncertainty and choice inconsistency. We show that model misspecification resulting from ignoring behavioral responses to complexity severely inflates structural estimates of present bias.

Suggested Citation

  • Benjamin Enke & Thomas Graeber & Ryan Oprea, 2023. "Complexity and Time," CESifo Working Paper Series 10327, CESifo.
    • Handle: RePEc:ces:ceswps:_10327
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10327.pdf
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    References listed on IDEAS

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    1. Thomas Graeber & Shakked Noy & Christopher Roth, 2024. "Lost in Transmission," ECONtribute Discussion Papers Series 272, University of Bonn and University of Cologne, Germany.

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    More about this item

    Keywords

    complexity; hyperbolic discounting; present bias; bounded rationality; noise; cognitive uncertainty;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G00 - Financial Economics - - General - - - General

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