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Behavior in long‐run projects and elicited time preferences

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Managerial and Decision Economics
Authors:
Zafer Akin
Zafer Akin
Abdullah Yavaş
Abdullah Yavaş
Abdullah Yavaş
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We investigate behavior in long‐run projects and its relationship with experimentally elicited time preferences. Participants engage in a longitudinal project requiring sustained real effort, with their time preferences estimated through monetary outcomes. We observe a tendency to front‐load real effort, with choices reflecting both present and future bias, the former being more prevalent and severe. We also find evidence of naive choice reversals. However, there is no support for the quasi‐hyperbolic discounting model in monetary choices, and its predictions do not align with real effort allocation patterns. Nevertheless, discount rate and present bias parameters derived from monetary outcomes demonstrate predictive power over real effort allocation.
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RESEARCH ARTICLE
Behavior in long-run projects and elicited time preferences
Zafer Akin
1
| Abdullah Yavas¸
2
1
Department of Decision Sciences and
Economics, American University in Dubai,
Dubai, UAE
2
Real Estate and Urban Land Economics,
University of Wisconsin-Madison, Madison,
Wisconsin, USA
Correspondence
Zafer Akin, Department of Decision Sciences
and Economics, American University in Dubai,
Dubai, UAE.
Email: zaferakin@gmail.com
Funding information
Türkiye Bilimsel ve Teknolojik Aras¸tırma
Kurumu
Abstract
We investigate behavior in long-run projects and its relationship with experimentally
elicited time preferences. Participants engage in a longitudinal project requiring sus-
tained real effort, with their time preferences estimated through monetary outcomes.
We observe a tendency to front-load real effort, with choices reflecting both present
and future bias, the former being more prevalent and severe. We also find evidence
of naive choice reversals. However, there is no support for the quasi-hyperbolic dis-
counting model in monetary choices, and its predictions do not align with real effort
allocation patterns. Nevertheless, discount rate and present bias parameters derived
from monetary outcomes demonstrate predictive power over real effort allocation.
JEL CLASSIFICATION
C91, D90
1|INTRODUCTION
Most of us regularly undertake long-run projects that yield a payoff
only upon completion within a specific time frame. Examples include
an architect designing a blueprint, a professor preparing a referee
report, or a student working on a presentation or pursuing certifica-
tion. The challenge is to efficiently allocate time and effort to maxi-
mize payoff, given intertemporal preferences and time constraints.
Common outcomes of these projects include last-minute completions,
scattered efforts, deadline extensions, early completions, and incom-
plete projects. Factors such as impatience, temptation, uncertainty,
and anticipatory feelings drive these intertemporal choices. Despite
these complexities, the discounted utility model remains the dominant
paradigm for modeling intertemporal choices, with choice reversals
being a significant behavioral regularity. While evidence of preference
reversals exists in both monetary and real effort domains (Ericson &
Laibson, 2019; Imai et al., 2021; Wang et al., 2016), there is limited
experimental evidence on time inconsistency in real effort tasks
requiring multiperiod investment, the compatibility of people's expec-
tations with their actual behavior, and the link between patience and
present bias in monetary and real effort domains. We address these
gaps by engaging subjects with a longitudinal real effort project, ask-
ing for their time allocation plans at different points, and estimating
quasi-hyperbolic discounting parameters to link them to their alloca-
tion behavior.
We introduce a laboratory experimental design in which partici-
pants are assigned a project requiring effort across at least two of
three working periods. Participants provide nonbinding time alloca-
tion plans for future periods. Additionally, we elicit their risk and
time preferences using incentivized lotteries and monetary choices
and estimate quasi-hyperbolic discounting parameters along with a
standard risk parameter. This design enables us to achieve the
following objectives: First, we observe participants' time allocation
patterns and assess their alignment with the discounted utility
framework. Second, by comparing planned versus actual allocations,
we identify time inconsistencies. Third, we evaluate whether partici-
pants are naive regarding these discrepancies, as indicated by recur-
ring gaps between plans and implementation. Finally, we analyze
the compatibility between time preferences derived from monetary
choices and those demonstrated in the intertemporal allocation of
effort.
We find that subjects exhibit time inconsistency in the long-term
real-effort project, with both present and future bias observed,
although present bias is more prevalent and severe. There is also
suggestive evidence of naivety regarding these inconsistencies. The
quasi-hyperbolic discounting model fails to accurately describe mone-
tary choices, and its predictions about time allocations in the long-run
project do not align with observed behavior. Nevertheless, discount
rate and present bias parameters, estimated from monetary choices,
have explanatory power on real effort allocation.
Received: 18 March 2024 Revised: 8 August 2024 Accepted: 10 September 2024
DOI: 10.1002/mde.4396
Manage Decis Econ. 2025;46:627–640. wileyonlinelibrary.com/journal/mde © 2024 John Wiley & Sons Ltd. 627
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