Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79428
Authors: 
Mayer, Thomas
Russell, Thomas
Year of Publication: 
2002
Series/Report no.: 
Working Papers, University of California, Davis, Department of Economics 02-8
Abstract: 
Close to half the California school districts let teachers choose whether to receive their salaries ten monthly payments or in twelve. Fisherine intertemporal maximization implies that they should choose ten payments and earn interest on their savings for their summer. But about half choose twelve installments , even though when summed over a reasonable period the foregone interest is considerable. This can be explained by the cost of exercising self control and by Laibson’s model of hyperbolic discounting. A survey of teachers supports this interpretation.
Subjects: 
Self Control
Intertemporal Utility Maximization
JEL: 
D91
D12
Document Type: 
Working Paper

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