Present Bias

Anujit Chakraborty

doi:10.3982/ecta16467

<jats:p>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. Such behavior violates stationarity of temporal choices, and hence exponential discounting. This paper provides a weakening of the stationarity axiom that can accommodate present‐biased choice reversals. We call this new behavioral postulate <jats:italic>Weak Present Bias</jats:italic> and characterize the general class of utility functions that is consistent with it. We show that present‐biased preferences can be represented as those of a decision maker who makes her choices according to conservative present‐equivalents, in the face of uncertainty about future tastes. </jats:p>

Present Bias

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