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  • 2023
  • Working Paper

Complexity and Time

By: Benjamin Enke, Thomas Graeber and Ryan Oprea
  • Format:Print
  • | Language:English
  • | Pages:66
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Abstract

We provide experimental evidence that core intertemporal choice anomalies -- including extreme short-run impatience, structural estimates of present bias, hyperbolicity and transitivity violations -- are driven by complexity rather than time or risk preferences. First, all anomalies also arise in structurally similar atemporal decision problems involving valuation of iteratively discounted (but immediately paid) rewards. These computational errors are strongly predictive of intertemporal decisions. Second, intertemporal choice anomalies are highly correlated with indices of complexity responses including cognitive uncertainty and choice inconsistency. We show that model misspecification resulting from ignoring behavioral responses to complexity severely inflates structural estimates of present bias.

Keywords

Decision Choices and Conditions; Motivation and Incentives

Citation

Enke, Benjamin, Thomas Graeber, and Ryan Oprea. "Complexity and Time." NBER Working Paper Series, No. 31047, March 2023.
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About The Author

Thomas W. Graeber

Negotiation, Organizations & Markets
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  • Managing Complexity at mymuesli By: Thomas Graeber and Stacy Straaberg
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