Experimental evidence that core intertemporal choice anomalies—like extreme short-run impatience, structural estimates of present bias, hyperbolicity & transitivity violations—are driven by complexity rather than time or risk preferences

Complexity and Time. Benjamin Enke, Thomas Graeber & Ryan Oprea. NBER Working Paper 31047. Mar 2023. DOI 10.3386/w31047

Abstract: We provide experimental evidence that core intertemporal choice anomalies -- including extreme short-run impatience, structural estimates of present bias, hyperbolicity and transitivity violations -- are driven by complexity rather than time or risk preferences. First, all anomalies also arise in structurally similar atemporal decision problems involving valuation of iteratively discounted (but immediately paid) rewards. These computational errors are strongly predictive of intertemporal decisions. Second, intertemporal choice anomalies are highly correlated with indices of complexity responses including cognitive uncertainty and choice inconsistency. We show that model misspecification resulting from ignoring behavioral responses to complexity severely inflates structural estimates of present bias.