Cognitive Uncertainty in Intertemporal Choice*

This paper experimentally documents the relevance of cognitive uncertainty – subjective uncertainty over one’s utility-maximizing action – for understanding and predicting intertemporal choice. The main idea is that when people are cognitively noisy, such as when a decision problem is very complex, they implicitly treat different time delays to some degree alike. By experimentally measuring and exogenously manipulating cognitive uncertainty, we document that this logic sheds light on why observed choices often appear very impatient over short horizons but not over longer ones, and why intertemporal decisions frequently violate transitivity. Structural estimations provide evidence that cognitive noisiness is a quantitatively important driver of intertemporal decisions, so that accounting for measured cognitive uncertainty generates large improvements in model fit. Finally, cognitive uncertainty also matters for choice architecture: people who are nervous about making mistakes in intertemporal decisions are twice as likely to follow expert advice.