Bedtime Inconsistency

If agents have optimistic beliefs about future time shocks, they will exhibit time-inconsistent choices over time-dated effort decisions that are observationally equivalent to those driven by β−δ preferences. When presented with information about their time inconsistency, however, β−δ agents will not change their allocative behavior but should increase their demand for commitment; optimistic agents will change their allocations but may not increase their commitment demand. In an experimental setting, we use these different predictions to adjudicate between the two models in two domains: bedtime decisions and intertemporal task allocations. We find evidence that both factors appear to be important determinants of time inconsistency. Information about subjects’ past dynamic inconsistency makes them less likely to be dynamically inconsistent in the future, which is consistent with optimism. On the other hand, the same information increases the subjects' demand for commitment, which is a prediction of the present bias model. These results illustrate the importance of both beliefs and preferences in understanding dynamically inconsistent choices.