Time Inconsistency, Sophistication, and Commitment An Experimental Study

Zhang, Qing ⓡ and Greiner, Ben (2020) Time Inconsistency, Sophistication, and Commitment An Experimental Study. Department of Strategy and Innovation Working Paper Series, 12/2020. WU Vienna University of Economics and Business, Vienna.

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Abstract

We experimentally study the relationship between time inconsistency, sophistication about time inconsistency, and self-commitment. Previous research has interpreted demand for commitment devices as evidence for the sophistication of a time-inconsistent decision-maker. In our laboratory experiment, we attempt to measure sophistication directly by way of a cognitive test. We then test the hypothesis that people who are both time-inconsistent and show high cognitive capacity take up commitment devices when offered in the strategic game between their current and their future self. For experimental laboratory commitment choices, we cannot detect a moderating effect of cognition on commitment demand of time-inconsistent subjects. However, we find that the existence of time-inconsistent preferences and sophistication (proxied by cognitive performance) can predict the demand for savings commitment in our hypothetical survey vignette question.

Item Type: Paper
Keywords: time-inconsistency, sophistication, present bias, future bias
Divisions: Departments > Strategy and Innovation > Markets and Strategy
Depositing User: Gerlinde Rattasits-Kaas
Date Deposited: 25 Mar 2020 12:12
Last Modified: 14 Apr 2020 06:55
URI: https://epub.wu.ac.at/id/eprint/7530

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