TY - BOOK
ID - 26086
TI - The Price of Uncertainty in Present-Biased Planning
AU - Albers, Susanne
AU - Kraft, Dennis
PB - Springer
PY - 2017
KW - behavioral economics
KW - incentive design
KW - heterogeneous agents
KW - approximation algorithms
KW - variable present bias
KW - penalty fees
SN - 9783319719245
AB - 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.
ER -