Essays on Timing and Economic Behavior

Abstract

Economic activities unfold over time. How does timing influence our choices? How do we control our timing? Economic agents are considered to satisfy their preferences in an optimal fashion subject to constraints.Each chapter in this thesis tackles a different one of these three elements where the timing of behavior is central.

In the first chapter, I study the impact of loss aversion on preferences for labor versus leisure. In a real-effort lab experiment, I show that a worker’s willingness to persevere in a task is influenced by information about task completion time. To directly assess the location and impact of reference dependence, I structurally estimate laborleisure preferences with a novel econometric approach drawing on computational neuroscience. Once participants exceed an expectations-based reference point, their subjective values of time rise sharply, and they speed up at the cost of reduced work quality and forgone earnings.

In the second chapter, I propose and implement a method to test the optimality of individual deliberative time allocation. I also conduct experiments to study perceptual decision making in both simple decisions, where the difference in values between better and worse choices is known, and complex decisions, where this value difference is uncertain. The test reveals significant departures from optimality when task difficulty and monetary incentives are varied. However, a recently developed model based on optimality provides an improvement in fit over its predecessor.

In the third chapter, I investigate the effects of memory constraints on choice over sequentially presented options. In a study that combines experimental paradigms used to analyze memory and judgment separately, I find a close link between order effects in choice and in memory. I show that cognitive load stemming from either an externally-imposed distractor or naturally-occuring fatigue substantially weakens primacy effects. Thus disrupting memory encoding and consolidation can potentially alleviate bias in judgment.