Alumni Talk Series: Holger Gerhardt (Bonn) and Timo Stein (Amsterdam)
Holger Gerhardt: “Concentration bias in intertemporal choice”
(Markus Dertwinkel-Kalt, Holger Gerhardt, Gerhard Riener, Frederik Schwerter, and Louis Strang)
Any decision that we make has consequences in the future. This future can be anything from near to very distant: days, months, or even decades later. Think, for instance, of smoking, buying real estate, or saving for retirement. Due to its ubiquity, intertemporal choice is one of the core concepts not only in economic theory but also in cognitive psychology and decision neuroscience.
Yet, how people exactly make decisions that involve future costs or benefits is still an open question. The two most prominent models of intertemporal choice, exponential and hyperbolic discounting, explain basic aspects of human behavior, but they fail in important dimensions. In particular, it seems that whether the consequences of the available options are dispersed over time (e.g., a payment plan for an expensive purchase) or concentrated at a particular time (e.g., paying lump sum) influences people’s choices in ways that are not captured by the standard models.
With our paper, we show experimentally that subjects exhibit a “concentration bias”: they systematically overweight large but infrequent payments relative to smaller but frequent payments which sum up to the same amount. Our findings are inconsistent with both exponential and hyperbolic discounting; they can be explained, however, by recent theoretical models that take perceptual influences into account, such as the “focusing model” (Kőszegi & Szeidl, Quarterly Journal of Economics, 2013) or “salience theory” (Bordalo, Gennaioli, & Shleifer, Journal of Political Economy, 2013).
A consequence of this bias is that people behave systematically more impatiently in certain situations than in others. This has important implications for fields as diverse as health economics, human-resource management (incentive schemes for job promotion, bonus payments), and public policy (retirement savings: lump-sum benefit vs. annuity).
Timo Stein: “Competition for visual awareness: What determines what we see?”
Consciousness is selective: At any given moment of time, we only perceive a limited number of elements of a visual scene. My research has determined some of the factors that influence this competition for visual awareness. I will present evidence that access to visual awareness is influenced by complex properties of visual stimuli, such as social relevance or familiarity, as well as by states of the observer, such as perceptual expertise or expectation. While these studies have added to a better understanding of the mechanisms underlying access to awareness, they have also sparked a new debate about the divide between non-conscious and conscious perception. I will argue that this debate has important implications for our view of consciousness.
