Template-Type: ReDIF-Paper 1.0
Author-Name: Claudia Cerrone
Author-Name-First: Claudia
Author-Name-Last: Cerrone
Author-Name: Anujit Chakraborty
Author-Name-First: Anujit
Author-Name-Last: Chakraborty
Author-Name: Hyok Jung Kim
Author-Name-First: Hyok Jung
Author-Name-Last: Kim
Author-Name: Leonhard Lades
Author-Name-First: Leonhard
Author-Name-Last: Lades
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Estimating Present Bias and Sophistication over Effort and Money
Abstract: We design and conduct a real-effort experiment that jointly estimates present bias and sophistication, without assuming identical present bias and sophistication across money and effort domains. We explain and empirically demonstrate how assuming identical sophistication for money and effort (as in Augenblick et al., 2019) can bias the estimates of key parameters. On average, 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 β̂ₑ of 0.80–0.88. For money, aggregate present bias βₘ is near zero, but substantial heterogeneity exists, with roughly equal numbers of participants exhibiting present bias and future bias. At the individual level, about three quarters of all participants correctly anticipate the direction of their bias in both domains, even if not its full magnitude.
Length: 
File-URL: https://repec.dss.ucdavis.edu/files/r3h8uzuoqldwdlof9w5vl0e8dw15/EEC-2024-0049_R1-2.pdf
File-Format: application/pdf
Number: 359
Classification-JEL: C91, D81, D90
KeyWords: present bias, sophistication, beliefs, experiment, real effort task, experiment
Creation-Date: 20231106
Handle: RePEc:cda:wpaper:359