Working Papers
Preference over Intertemporal Profiles: All-Sooner Effect and Magnitude Effect. November 2017.
[JOB MARKET PAPER]
Abstract: Many economic decisions are choices between intertemporal profiles, that is, between combinations of outcomes at several points in time. The current study uses an experiment to measure preferences over such profiles. We document two characteristics of preferences that cannot be captured by a classic discounting model. First, we find a disproportionate level of impatience in case it is possible to have all rewards on the earliest date (the all-sooner effect). This phenomenon violates convexity, a property assumed in most models and applications. Second, we find that the discount factor is not affected by stakes, while the elasticity of intertemporal substitution is larger for higher stakes (the magnitude effect). These results suggest that estimation of discounting models will lead to biased parameters if these two effects are ignored. I propose a simple model which captures these two effects to facilitate parametric estimation in future studies.
[Paper]
Magnitude Effect in Intertemporal Allocation Tasks. October 2016. Chen Sun and Jan Potters.
Abstract: We investigate how the intertemporal allocation of monetary rewards is influenced by the size of the total budget, with a particular interest in the channels of influence. We find a significant magnitude effect: the budget share allocated to the later date increases with the size of the budget. This effect does not depend on whether the sooner reward is paid in the present or in the future, implying that the factors which drive the present bias cannot account for the magnitude effect. At the aggregate level as well as at the individual level, we find magnitude effects both on the discount rate and on intertemporal substitutability (i.e. utility curvature). The latter effect is consistent with theories in which the degree of asset integration is increasing in the stake.
[Paper] [Slides]
Does Making a Choice Affect Subsequent Belief Formation? An Experimental Study. February 2017.
Abstract: When uncertainty is present, choices are based on beliefs, but do choices in turn have an effect on belief formation? We perform an experiment to study choice-induced belief change in an individual decision-making context. After being presented with noisy signals about the values of two options, subjects are randomly assigned to one of the three treatments: making a choice between the two options, receiving a random option, or possessing no option. Then they are presented with more signals and are asked to estimate the values of the two options. We find no significant differences between the distributions of estimates in the three groups, no matter whether belief elicitation is incentivized or not, and no matter whether previous signals are perfectly accessible or not, which suggests that making a choice does not lead to an economically meaningful effect on subsequent belief formation in our setting.
[Paper] [Slides]
[JOB MARKET PAPER]
Abstract: Many economic decisions are choices between intertemporal profiles, that is, between combinations of outcomes at several points in time. The current study uses an experiment to measure preferences over such profiles. We document two characteristics of preferences that cannot be captured by a classic discounting model. First, we find a disproportionate level of impatience in case it is possible to have all rewards on the earliest date (the all-sooner effect). This phenomenon violates convexity, a property assumed in most models and applications. Second, we find that the discount factor is not affected by stakes, while the elasticity of intertemporal substitution is larger for higher stakes (the magnitude effect). These results suggest that estimation of discounting models will lead to biased parameters if these two effects are ignored. I propose a simple model which captures these two effects to facilitate parametric estimation in future studies.
[Paper]
Magnitude Effect in Intertemporal Allocation Tasks. October 2016. Chen Sun and Jan Potters.
Abstract: We investigate how the intertemporal allocation of monetary rewards is influenced by the size of the total budget, with a particular interest in the channels of influence. We find a significant magnitude effect: the budget share allocated to the later date increases with the size of the budget. This effect does not depend on whether the sooner reward is paid in the present or in the future, implying that the factors which drive the present bias cannot account for the magnitude effect. At the aggregate level as well as at the individual level, we find magnitude effects both on the discount rate and on intertemporal substitutability (i.e. utility curvature). The latter effect is consistent with theories in which the degree of asset integration is increasing in the stake.
[Paper] [Slides]
Does Making a Choice Affect Subsequent Belief Formation? An Experimental Study. February 2017.
Abstract: When uncertainty is present, choices are based on beliefs, but do choices in turn have an effect on belief formation? We perform an experiment to study choice-induced belief change in an individual decision-making context. After being presented with noisy signals about the values of two options, subjects are randomly assigned to one of the three treatments: making a choice between the two options, receiving a random option, or possessing no option. Then they are presented with more signals and are asked to estimate the values of the two options. We find no significant differences between the distributions of estimates in the three groups, no matter whether belief elicitation is incentivized or not, and no matter whether previous signals are perfectly accessible or not, which suggests that making a choice does not lead to an economically meaningful effect on subsequent belief formation in our setting.
[Paper] [Slides]
Work in progress
Dynamics of Self-Control: Theory and Experiment