Myopia and Intertemporal Choice

This paper investigates whether imperfect foresight affects intertemporal choice using three experiments. We study the effects of both exogenously introduced and naturally occurring (i.e., summer vacation) forecasting difficulties, as well as the effects of increasing internal forecasting effort. These experiments provide consistent evidence that people tend to avoid allocating money to periods they cannot clearly foresee. This avoidance also leads to a non-monotonic change in discount rate across the boundaries of summer vacation, a pattern observed for the first time in the literature. The fact that imperfect foresight has important and novel effects on intertemporal choice deserves further investigation.