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Po 02.11.2015

Johannes Haushofer, Ph.D. (Princeton) “The Cost of Keeping Track”

Johannes Haushofer, Ph.D.

Princeton University, USA

Author: Johannes Haushofer

Abstract: I show that a lump-sum cost of keeping track of future transactions predicts several known departures from the standard discounting model:  decreasing impatience with dynamic inconsistency; a magnitude effect; a reversal of this magnitude effect in the loss domain; a sign effect; and an Andreoni-Sprenger (2012) type reduction of discounting and decreasing impatience when money is added to existing payoffs. Agents of this type “pre-crastinate” on losses and are willing to pay for reminders. These results speak to failures of technology adoption in developing countries, and empirical tests conducted in Nairobi, Kenya confirm the model’s predictions.

JEL codes: D9, D11, D60, D91, E21, D03, D81, C9

Keywords:  intertemporal choice, temporal discounting, time preference, memory, limited attention, technology adoption

Full Text:  “The Cost of Keeping Track”