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    Chapter The Price of Uncertainty in Present-Biased Planning

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    Author(s)
    Albers, Susanne
    Kraft, Dennis
    Collection
    European Research Council (ERC); EU collection
    Language
    English
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    Abstract
    The tendency to overestimate immediate utility is a common cognitive bias. As a result people behave inconsistently over time and fail to reach long-term goals. Behavioral economics tries to help affected individuals by implementing external incentives. However, designing robust incentives is often difficult due to imperfect knowledge of the parameter β ∈ (0, 1] quantifying a person’s present bias. Using the graphical model of Kleinberg and Oren [8], we approach this problem from an algorithmic perspective. Based on the assumption that the only information about β is its membership in some set B ⊂ (0, 1], we distinguish between two models of uncertainty: one in which β is fixed and one in which it varies over time. As our main result we show that the conceptual loss of effi- ciency incurred by incentives in the form of penalty fees is at most 2 in the former and 1 + max B/ min B in the latter model. We also give asymptotically matching lower bounds and approximation algorithms.
    Book
    Web and Internet Economics
    URI
    http://library.oapen.org/handle/20.500.12657/30615
    Keywords
    behavioral economics; incentive design; heterogeneous agents; approximation algorithms; variable present bias; penalty fees; behavioral economics; incentive design; heterogeneous agents; approximation algorithms; variable present bias; penalty fees; Alice and Bob; Decision problem; Graph theory; Graphical model; NP (complexity); Time complexity; Upper and lower bounds
    DOI
    10.1007/978-3-319-71924-5_23
    OCN
    1076689890
    Publisher
    Springer Nature
    Publisher website
    https://www.springernature.com/gp/products/books
    Publication date and place
    2017
    Grantor
    • H2020 European Research Council - 691672 - APEG - H2020 Research grant informationFind all documents
    Classification
    Computing and Information Technology
    Pages
    15
    Public remark
    Relevant Wikipedia pages: Algorithm - https://en.wikipedia.org/wiki/Algorithm; Alice and Bob - https://en.wikipedia.org/wiki/Alice_and_Bob; Approximation algorithm - https://en.wikipedia.org/wiki/Approximation_algorithm; Behavioral economics - https://en.wikipedia.org/wiki/Behavioral_economics; Decision problem - https://en.wikipedia.org/wiki/Decision_problem; Graph theory - https://en.wikipedia.org/wiki/Graph_theory; Graphical model - https://en.wikipedia.org/wiki/Graphical_model; NP (complexity) - https://en.wikipedia.org/wiki/NP_(complexity); Time complexity - https://en.wikipedia.org/wiki/Time_complexity; Upper and lower bounds - https://en.wikipedia.org/wiki/Upper_and_lower_bounds
    Rights
    https://creativecommons.org/licenses/by/4.0/
    • Imported or submitted locally

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    • If not noted otherwise all contents are available under Attribution 4.0 International (CC BY 4.0)

    Credits

    • logo EU
    • This project received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 683680, 810640, 871069 and 964352.

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