Working Paper: NBER ID: w20381
Authors: Keith M. Marzilli Ericson
Abstract: I examine the interaction between present-bias and limited memory. Individuals in the model must choose when and whether to complete a task, but may forget or procrastinate. Present-bias expands the effect of memory: it induces delay and limits take-up of reminders. Cheap reminder technology can bound the cost of limited memory for time-consistent individuals but not for present-biased individuals, who procrastinate on setting up reminders. Moreover, while improving memory increases welfare for time-consistent individuals, it may harm present-biased individuals because limited memory can function as a commitment device. Thus, present-biased individuals may be better off with reminders that are unanticipated. Finally, I show how to optimally time the delivery of reminders to present-biased individuals.
Keywords: memory; procrastination; reminders; present bias
JEL Codes: D03; D81; D86; D9
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Optimal timing of reminders (C41) | influenced by present bias (D91) |
| Timing of reminders (C41) | different for present-biased vs. time-consistent individuals (D15) |
| Present bias (D15) | procrastination on setting up reminders (D91) |
| procrastination on setting up reminders (D91) | delayed task completion (C41) |
| Present bias (D15) | delayed task completion (C41) |
| Limited memory (E51) | commitment device for present-biased individuals (D15) |
| Limited memory (E51) | reminders may not always be beneficial (D91) |
| Interaction between present bias and limited memory (D91) | welfare outcomes (I38) |
| Present bias and limited memory (D91) | reminders that are anticipated vs. unanticipated (D84) |