Lab

Loss Aversion and Social Image Concerns

Focusing effects and time discounting

Revised and resubmitted Review of Economic Studies Working paper August 2019 In many intertemporal decisions, the benefit of an action is concentrated in a few time periods, while the associated cost is dispersed over numerous periods. According to the ``focusing model” by \cite{Koszegi2013}, the more a utility outcome is concentrated in time, the more a decision maker focuses on and, hence, \textit{over}weights it. Such concentration bias provides a micro-foundation for present-biased and future-biased behaviour.