Working Paper: CEPR ID: DP2237
Authors: Isabelle Brocas; Juan D. Carrillo
Abstract: We analyze the decision of individuals with time inconsistent preferences who undertake irreversible activities yielding either a current cost and a future benefit or a current benefit and a future cost. We first show that, when benefits come earlier than costs, the individual faces a coordination problem with himself that results in multiple, rankable equilibria. Some of these equilibria may exhibit rush, in the sense that the activity is undertaken 'too early' (i.e. with a negative payoff). Multiplicity explains why individuals succeed or not in avoiding temptations, depending on 'the degree of trust in their future decision'. Second, we prove that competition between agents for the same activity can be beneficial for them both when costs come before and after benefits: it decreases the agents' incentives to procrastinate (i.e. to undertake the activity 'too late') in the former case and to rush in the latter. Last, complementarity oftasks exacerbates the tendency to rush and to procrastinate. Under procrastination, it may even imply that projects which are valuable for all agents are never undertaken.
Keywords: time-inconsistency; rush; procrastination; decision-making under uncertainty
JEL Codes: A12; D83; D92; Q20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Individuals with time inconsistent preferences (D15) | coordination problem with themselves (P11) |
| coordination problem with themselves (P11) | multiple equilibria in decision-making (D00) |
| Individuals with time inconsistent preferences (D15) | rushing or procrastination (D91) |
| competition among agents (L85) | reduces tendency to procrastinate (D91) |
| competition among agents (L85) | mitigates rush (Y60) |
| task complementarity (D10) | exacerbates tendency to rush or procrastinate (D91) |
| competition among agents (L85) | tasks undertaken sooner without welfare loss (D61) |