Limited Memory, Deadlines, and Incentives: Theory and Experimental Evidence

Behavioral economics seminar

The presenter is Steffen Altmann from the Department of Economics at the University of Copenhagen.

Abstract

This paper analyzes the behavioral consequences of deadlines and incentives in intertemporal choices when people are subject to limitations in memory and attention. We provide a simple theoretical framework for studying the influence of memory limitations on behavior and test the model's key comparative statics with a randomized field experiment. In our model, an agent has to decide when to fulfill a task that requires costly effort provision. Postponing can be beneficial due to fluctuations in effort costs, but bears the risk that the task drops off the top of the agent's mind. We analyze how deadlines and economic incentives influence the timing as well as the overall likelihood of task fulfillment. In the second part of the paper, we test the main predictions of the model in a field experiment with patients of a German dental practice. In the experiment, we exogenously vary how people are reminded about the need to arrange a new check-up appointment. We randomize both the deadline for arranging a check-up and patients' incentives to make the appointment in time. In line with our theoretical framework, our empirical results indicate that stronger incentives as well as relatively tight, clearly specified deadlines encourage patients to make their check-ups earlier and at an overall higher frequency. Complementary evidence from a within-sample survey and an online survey experiment supports the notion that shorter deadlines may help people overcome delays due to memory limitations.