City Research Online

Abstract

We design and conduct a real-effort experiment to jointly estimate present bias and sophistication across effort and monetary domains. Unlike prior work (e.g.,Augenblick and Rabin, 2019; Fedyk, 2024), we do not assume that these parameters are identical across domains. We explain and empirically demonstrate how assuming identical sophistication across money and effort domains can bias the estimates of key parameters. In our online experiment, participants chose to (predicted to) complete 14% (10%) fewer tasks on the same day than on a future day, leading to an estimated present bias (βℯ) over effort of 0.70–0.79, and an estimated sophistication (ˆβℯ) of 0.80–0.88. For money, aggregate present bias (βₘ) is near zero, but there is substantial heterogeneity, with roughly equal numbers of participants exhibiting present bias and future bias. At the individual level, roughly three quarters of all participants correctly anticipate the direction of their bias in both domains, even if not its full magnitude.

Publication Type:	Article
Additional Information:	© The Authors. Published by CUP. This is an open-access article distributed under the terms of Creative Commons: Attribution License 4.0 (http://creativecommons.org/licenses/by/4.0/).
Publisher Keywords:	Experiment; present bias; sophistication; time preferences
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Departments:	School of Policy & Global Affairs School of Policy & Global Affairs > Department of Economics
SWORD Depositor:	Symplectic Administrator

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