But are MBAs real humans?

Highly impatient individuals overweight immediate costs vis-a-vis delayed benefits, procrastinating in activities where costs are upfront, while overindulging in activities where costs are delayed with respect to benefits. While the link between these two phenomena is really at the heart of this literature, we are not aware of any paper testing the connection.

In this paper, we design an experiment to achieve this goal. We ask a large sample of MBAs students who have completed a series of games and won an amount between $0 and $300 whether they want to receive this amount now or in two weeks. Instead of paying them in cash, as is common in the literature, we choose to pay them with a check. This enables us not only to keep constant the delivery method, but also to follow the timing of their decision to cash the check and measure their degree of procrastination with the actual behavior in cashing the check.

Payment with the check makes the decision of when to optimally accept the prize less straightforward. In the acceptance decision, a rational individual will take into consideration his/her procrastination in cashing the check.

Our results lend support to the hypothesis that subjects who have a preference for immediacy are indeed more likely to procrastinate.

The Ernesto, Paola and Luigi (first, rather than last, names; chosen for how good they sound together) NBER paper is here.

by datacharmer | Tuesday, January 22, 2008
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