Year: 2018
Type: article
Abstract: In general, the more freedom we have, the better choices we can make, and thus, the better possible economic outcomes. However, in practice, people often artificially restrict their future options by making a commitment. At first glance, commitments make no economic sense, and so their ubiquity seems puzzling. Our more detailed analysis shows that commitment often makes perfect economic sense: namely, it is related to the way we take future gains and losses into account. With the traditionally assumed expo- nential discounting, commitment indeed makes no economic sense, but with the practically observed hyperbolic discounting, commitment is indeed often economically beneficial.
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
Funder: National Science Foundation
OpenAlex ID: W2906599668