Working Paper
Inconsistent time preferences and on-the-job search - when it pays to be naive
Matthias Fahn, Regina Seibel
CESifo, Munich, 2019
CESifo Working Paper No. 7604
CESifo, Munich, 2019
CESifo Working Paper No. 7604
We study optimal employment contracts for present-biased employees who can conduct on-the-job search. Presuming that firms cannot offer long-term contracts, we find that individuals who are naive about their present bias will actually be better off than sophisticated or time-consistent individuals. Moreover, they search more, which partially counteracts the inefficiencies caused by their present bias.
CESifo Category
Behavioural Economics
Labour Markets
Behavioural Economics
Labour Markets
JEL Classification: D210, D830, D900, J310, J320