Procrastination , self - imposed deadlines and other commitment devices

In this paper we model a decision maker who must exert costly effort to complete a single task by a fixed deadline. Effort costs evolve stochastically in continuous time. The decision maker will then optimally wait to exert effort until costs are less than a given threshold, the solution to an optimal stopping time problem. We derive the solution to this model for three cases: (1) time consistent decision makers, (2) näıve hyperbolic discounters and (3) sophisticated hyperbolic discounters. Sophisticated hyperbolic discounters behave as if they were time consistent but instead have a smaller reward for completing the task. We show that sophisticated decision makers will often self-impose a deadline to ensure early completion of the task. Other forms of commitment are also discussed. ∗Department of Economics, New York University, 19 W 4 Street, 6 Floor, New York, NY 10012. E-mail: [email protected], url: http://www.econ.nyu.edu/user/bisina. †Department of Economics, Southern Methodist University, 3300 Dyer Street, Suite 301R, Dallas, TX 75275. E-mail: [email protected], url: http://faculty.smu.edu/hyndman.