Anujit Chakraborty (University of British Columbia)

“Present Bias”

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abstract

Present bias is the inclination to prefer a smaller present reward to a larger later reward, but reversing this preference when both rewards are equally delayed. This paper investigates and characterizes the most general class of present-biased temporal preferences. We show that any present-biased preference has a max-min representation, which can be cognitively interpreted as if, the decision maker considers the most conservative present equivalents in the face of uncertainty about future tastes. We also discuss empirical anomalies which temporal models like beta-delta or hyperbolic discounting cannot account for, but the proposed general representation can accommodate.