Year: 2005
Type: article
Study design: Observational Study
Abstract: Approximately one‐half of California's Unified School Districts give teachers a choice of receiving their annual salaries in 10 or 12 monthly payments. Intertemporal utility maximization à la Irving Fisher suggests that they should choose 10 payments and earn interest on their savings. But about 50% of the teachers choose 12 installments, even though when summed over a reasonable period the forgone interest can be considerable. This behavior can be explained by the cost of exercising self‐control and by Laibson's model of hyperbolic discounting. A survey of teachers supports this interpretation. (JEL D91, D12)
Source: Economic Inquiry
DOI: 10.1093/ei/cbi060
Authors: Thomas Mayer, Thomas Russell
Institution: University of California, Davis
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2017198715