Intertemporal Decision-Making with Endogenous Attention Costs DSE - University of Bologna FUR XII Davide Dragone Luiss, Rome June, 26 th 2006 2 What are rest-breaks? What are they for? Rest-breaks useful for managing the accumulation of fatigue due to the exertion of prolonged effort over time What kind of fatigue? Induced by paying attention to complex cognitive activities 3 Being rested/tired/fatigued are not common concepts in the vocabulary of an economist The closest economic concept is effort, generally treated in terms of preferences and incentives e.g.: P/A literature But little attention to the fact that, if exhausted, incentives can be not enough Like a biker climbing a mountain 4 It is not just a matter of preferences but of constraints on the set of possible paths of behavior, endogenously given by previous actions. 5 Goal of the paper To present a simple theoretical model to study the role of the (endogenous) condition of fatigue on the behavior of an individual that exerts prolonged effort over time Only one precedent (Ozdenoren, Salant, Silverman, 2006): on self-control 2 extensions: Environment: Multi-tasking and cognitive (over)load Preferences: on the condition of rest/fatigue 6 The Model An individual must exert a prolonged attention effort. Exerting effort has two effects: Positive and direct on utility Negative and indirect: it induces fatigue If exhausted, the individual cannot exert effort anymore The problem is solved by an external agency 7 The problem x(t): attention effort, at time t s(t) : rest condition, at time t s o : initial rest condition sbar : holiday rest condition f(x) : depletion, as a function of the exerted effort 8 Basic model: Qualitative results 9 Extension 1: Multi-tasking 10 Multi-tasking (continued) 11 Extension 2: Preference for rest 12 To sum up A model to focus on the accumulation of fatigue when a prolonged effort over time is required Rest/fatigue can constrain the set of feasible behavioral paths, beyond motivations and preferences Not an alternative approach, but complementary to the usual economic approach to intertemporal decision-making 13 Extensions To test the predictions for the multi- tasking and overload extension To introduce goals to be achieved within a given time interval To introduce habits: cycles