We investigate how overconfidence and production technology interact to influence decision making. We show that increasing a production factor can make an overconfident agent worse off. Two effects drive this result. First, if the production factor is a complement with ability, then the...

Exponential-growth bias (EGB) is the tendency for individuals to partially neglect compounding of exponential growth. We develop a model wherein biased agents misperceive the intertemporal budget constraint, and derive conditions for overconsumption and dynamic inconsistency. We construct an...

We elicit subjects' beliefs about the likelihood that they will redeem a mail-in form. Expected redemption rates exceed actual redemption rates by 49 percentage points, meaning that subjects are overoptimistic about their likelihood of redemption. We test the impact of three “nudges” on...

Exponential-growth bias is the tendency to neglect the compounding of interest. The economics literature has used the fact that a biased agent in many circumstances will underestimate the value of assets that grow according to compound interest. We show that the opposite can also be true. It is...

We develop a model in which people experience standard consumption utility, as well as anticipatory utility defined as the weighted sum of independently anticipated consumption “episodes” or “dimensions”. The weights on these dimensions correspond to the attention that the person pays to...

Exponential-growth bias (EGB) is the tendency to neglect the power of compounding inter- est. A person with EGB will misperceive the intertemporal budget constraint, overestimating lifetime wealth and underestimating the differences in the cost of consumption across periods . We test four...

There is considerable variation in retirement savings within income, age, and educational categories. Using a broad sample of the U.S. population, we elicit time preference parameters from a quasi-hyperbolic discounting model, and perceptions of exponential growth. We find that present bias...

Defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment. Using administrative data on employer-sponsored retirement accounts linked to...

Defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment. Using administrative data on employer-sponsored retirement accounts linked to...