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Temptation: Immediacy and certainty

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  • J. Lucas Reddinger

Abstract

Is an option especially tempting when it is both immediate and certain? I test the effect of risk on the present-bias factor given quasi-hyperbolic discounting. In my experiment workers allocate about thirty to fifty minutes of real-effort tasks between two weeks.I study dynamic consistency by comparing choices made two days in advance of the work-day with choices made when work is imminent. My novel design permits estimation of present bias using a decision with a consequence that is both immediate and certain. I find greater present bias when the consequence is certain.This finding has implications for any economic decision involving a present-biased decision-maker, including labor contracting and consumer good pricing. I offer a methodological remedy for experimental economists.

Suggested Citation

  • J. Lucas Reddinger, 2024. "Temptation: Immediacy and certainty," Purdue University Economics Working Papers 1338, Purdue University, Department of Economics.
    • Handle: RePEc:pur:prukra:1338
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    1. Mohammed Abdellaoui & Han Bleichrodt & Olivier l'Haridon & Corina Paraschiv, 2013. "Is There One Unifying Concept of Utility?An Experimental Comparison of Utility Under Risk and Utility Over Time," Management Science, INFORMS, vol. 59(9), pages 2153-2169, September.
    2. Cheung, Stephen L. & Tymula, Agnieszka & Wang, Xueting, 2021. "Quasi-Hyperbolic Present Bias: A Meta-Analysis," IZA Discussion Papers 14625, Institute of Labor Economics (IZA).
    3. Beattie, Jane & Loomes, Graham, 1997. "The Impact of Incentives upon Risky Choice Experiments," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 155-168, March.
    4. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 155-161.
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    More about this item

    Keywords

    present bias; dynamic inconsistency; quasi-hyperbolic discounting; timepreferences; risk preferences; immediacy effect; certainty effect; experimental economics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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