Overwork through Projection Bias


Working becomes harder as we grow tired or bored. I model individuals who underestimate changes in marginal disutility – as implied by ‘projection bias’ – when deciding whether or not to continue working. In this talk I show that (i) individuals will have fluctuating overoptimism about how much work they will get done; (ii) they will spend too much time on time-sensitive tasks at the expense of less time-sensitive, but potentially more important tasks; (iii) and they may work too much, due to underestimating the value of rest. I consider two applications, the first one with teamwork where colleagues waste time lobbying in order to take advantage of the overreaction to time-sensitivity of tasks. In the second, I show that the possibility that workers may work so much that they incur higher work costs, while having lower total utility - they burn themselves out.

Working Paper