Pessimism and Overcommitment

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Title: Pessimism and Overcommitment
Authors: Ek, ClaesSamahita, Margaret
Permanent link: http://hdl.handle.net/10197/11088
Date: 13-Sep-2019
Online since: 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.
metadata.dc.description.othersponsorship: Torsten Söderberg Foundation
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Start page: 1
End page: 41
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP2019/21
Copyright (published version): 2019 the Authors
Keywords: Commitment devicePessimismSelf-control
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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