Project overview
The present bias is a prevailing phenomenon when people prefer the (financial) option that has a smaller but more recent payoff over other options with larger but more distant payoffs. To prevent people from making myopic financial decisions, we need to understand two intertwining factors involved in the decision process: risk attitude and time preference. To disentangle their effects, a lot of models, such as the discounted expected utility model, prospect theory, etc., have been proposed. However, none of them provides perfect explanations for observed behaviour, and how to correctly combine risk and time preferences in a model is yet to be discovered.
The aim of this project is to investigate whether time preferences would be influenced by the perceived level of risks. In this project, we will design an experiment where participants will be asked to distribute financial resources between two options: the smaller-recent option vs. the larger-distant option. We manipulate the levels of risk by varying the probabilities of actual payments. Participants’ risk attitudes and perceptions will be measured with the Holt-Laury lottery method and Domain-Specific Risk-Taking (DOSPERT) scale. The experiments will be implemented in z-Tree.
The aim of this project is to investigate whether time preferences would be influenced by the perceived level of risks. In this project, we will design an experiment where participants will be asked to distribute financial resources between two options: the smaller-recent option vs. the larger-distant option. We manipulate the levels of risk by varying the probabilities of actual payments. Participants’ risk attitudes and perceptions will be measured with the Holt-Laury lottery method and Domain-Specific Risk-Taking (DOSPERT) scale. The experiments will be implemented in z-Tree.
