Time Preferences

• People are Present Biased - they tend to be patient over long periods and very impatient when making decisions affecting the near future
• What kind of person would have this utility function?

  x1 + x2 * δ + x3 * δ^2

  Time Consistent
• What kind of person would have this utility function?

  x1 + x2 * β * δ + x3 * β * δ^2

  Present Biased
• A present-biased person's optimal utility is determined by backward induction
• A nudge is a subtle intervention that influences people's choices without restricting their options or changing incentives