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Pessimism and Overcommitment
Author(s)
Date Issued
2019-09-13
Date Available
2019-09-26T11:37:03Z
Abstract
Economic agents commonly use commitment devices to limit impulsive behavior in the interest of long-term goals. We provide evidence for excess demand for commitment in a laboratory experiment. Subjects are faced with a tedious productivity task and a tempting option to surf the internet. Subjects state their willingness-to-pay for a commitment device that removes the option to surf. The commitment device is then allocated with some probability, thus allowing us to observe the behavior of subjects who demand commitment but have to face temptation. We find that a significant share of the subjects overestimate their demand for commitment when compared to their material loss from facing the temptation. This is true even when we take into account the potential desire to avoid psychological costs from being tempted. Assuming risk aversion does not change our conclusion, though it suggests that pessimism in expected performance, rather than psychological cost, is the main driver of overcommitment. Our results suggest there is a need to reconsider the active promotion of commitment devices in situations where there is limited disutility from the tempting option.
Other Sponsorship
Torsten Söderberg Foundation
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Start Page
1
End Page
41
Series
UCD Centre for Economic Research Working Paper Series
WP2019/21
Copyright (Published Version)
2019 the Authors
Classification
C91
D03
D91
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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