Working Paper: CEPR ID: DP4084
Authors: Thomas Langer; Martin Weber
Abstract: The feedback frequency and the length of commitment are two important features of investment alternatives in intertemporal decision-making. So far, empirical research has shown that a lower feedback frequency combined with a longer binding period decreases myopia and thereby increases the willingness to invest into a risky asset. Almost nothing is known, however, about the isolated effect of each variable and about a possible interaction of these variables. In an experimental study, we disentangle the intertwined manipulation of feedback frequency and binding period, commonly used in previous research, to analyse how both variables alone contribute to the change in myopia. We find a strong effect depending on the length of commitment, a much less pronounced effect of feedback and a strong interaction between both variables. The results have important implications for real world intertemporal decision-making.
Keywords: evaluation period; feedback frequency; intertemporal decision making; length of commitment; myopic loss aversion
JEL Codes: D80; G10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| binding decisions (long commitment) (L14) | investment in risky assets (G11) |
| less frequent feedback (Z00) | investment in risky assets (G11) |
| binding decisions + frequent feedback (D91) | investment in risky assets (G11) |