Dean Yang
University of Michigan With Discussant
Vivian Hoffmann
University of Maryland
A new interest in intertemporal choice is fueled by evidence of time-inconsistent behavior in low-income households---hard decisions about the future that people would revise later without some commitment device. This paper reports the results of a field experiment in rural Malawi designed to evaluate, directly, the relationship between intertemporal choice under commitment and time-inconsistency. The experiment uses real choices over money to elicit time preferences from approximately 2,200 subjects. The stakes of the intertemporal choices were high, representing a total of about one month’s wages, on average. A randomly selected subset of respondents was later approached in the two weeks prior to their first disbursement of money. These subjects were reminded of their initial choices and asked if they would like to revise them and thus exhibit time-inconsistency. Choices under commitment reveal substantial heterogeneity in the consistency of choice with the law of demand, time preference, and dynamic consistency. When the commitment is broken, revisions are common, and they are only somewhat more likely to reallocate income backward in time. Following the theory, revisions are correlated with preferences under commitment.
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