Temptation: Immediacy and certainty

TL;DR

This paper investigates how immediacy and certainty influence present bias, finding that certainty increases present bias, with implications for economic decisions and a new experimental method.

Contribution

It introduces a novel experimental design to measure present bias under certainty and immediacy, revealing that certainty amplifies present bias effects.

Findings

Greater present bias observed with certain outcomes

Implications for labor contracts and consumer pricing

Provides a new methodological approach for experiments

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 workday 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.