Fickle groups: A field experiment on time preferences

Policy brief State Effectiveness

This policy brief seeks to understand whether randomly formed groups are biased towards the present and how their constituent members’ time preferences determine their group time preferences.

  • Intertemporal choices – decisions for which costs and benefits are spread out over time – are important for households, policymakers, and managers. However, most of the literature on this topic focuses on individual decision-making, even though many dimensions of intertemporal choice are better modelled at the group level.
  • This policy brief considers the following question: are randomly formed groups biased towards the present, and how do their constituent members’ time preferences determine their group time preferences?
  • To answer this question, we conducted a field experiment with 425 female community health workers in Pakistan to measure the time preferences of individuals and groups through an effort-allocation task over three weeks.
  • Our findings suggest that the degree of time inconsistency and the present bias estimate are lower for individuals than groups. We also find that group present bias is mostly driven by the individual with the greatest present bias and that variance in the group members’ discount rates and bargaining power explains group present bias.
  • Based on our research, we recommend that government departments measure the intertemporal behaviour of their employees and create contracts with individually tailored incentives.