The authors examine self-control problems–modeled as time-inconsistent, present-biased preferences–in a model where a person must do an activity exactly once. They emphasize two distinctions: do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate–do too soon–immediate-reward activities. Sophistication mitigates procrastination …
Tag Archives: Life Cycle Models and Saving
Angeletos, G. M., Laibson, D., Repetto, A., Tobacman, J., &Weinberg, S. (2001). The hyperbolic consumption model: Calibration, simulation, and empirical evaluation.
Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper presents simulations of the savings and asset allocation choices of households with hyperbolic preferences. The behavior of the hyperbolic households is compared to the …