On the behavioral effects of deadlines – and their implications for policy design

By Christian Traxler

Deadlines are omnipresent and govern important economic decisions at the workplace or in consumer markets. While deadlines are crucial to coordinate complex team work in organizations, they also impose clear constraints on our choice sets. Deadlines restrict, for instance, our options to redeem a time-limited coupon or to return a product we bought online. From a consumer perspective, tight deadlines might therefore appear unattractive.

In joint work with Steffen Altmann and Philipp Weinschenk, we explore the role of deadlines when people face cognitive limitations. Using a simple analytical framework, we show that an individual with limited memory or attention might be more likely to execute a given task under a shorter rather than a longer deadline. The intuition is that a shorter deadline “forces” the individual to act earlier, i.e., at a point in time where she is still likely to pay full attention to the task at hand.

To test this and further predictions from our model, we conducted two field experiments at a dental clinic. The experiments vary patients’ deadlines and economic incentives for calling and arranging preventive check-ups. The results document that relatively tight deadlines exert strong effects on the timing of actions. Imposing a one- or three-week deadline also increase overall response rates relative to a situation in which patients face no deadline. After 100 days, cumulative response rates in the deadline conditions remain significantly above those observed under no deadline.

In a second trial, that tested longer deadlines, we find more pre-deadline responses under short as compared to much longer deadlines of six or ten weeks: under a relatively tight three-week deadline, patients were more likely to call the dentist within three weeks, as compared to patients’ likelihood of calling within six or ten weeks under the longer deadlines. Our evidence therefore suggests that tight deadlines may trigger earlier responses as well as overall higher response rates.

While it is up to further research to assess the external validity of these findings for other settings, it seems important to highlight two potential policy implications from our findings. On the one hand, there is a wide range of applications where institutions could impose deadlines in order to increase people’s responsive¬ness. For instance, when asking potential recipients to apply for support programs (a grant, subsidy or tax advantage, etc.), adding a deadline could actually increase take-up. In the domain of consumer policy, on the other hand, one has to carefully consider whether prolonging deadlines is indeed beneficial for all consumers. If, for instance, a company offers seemingly generous extensions of rights to its customers - e.g., very long deadlines for cancellations or product returns - this offer might ultimately not be consumer friendly, at least not for individuals with cognitive limitations.

The full paper “Deadlines and Cognitive Limitations” (pdf) is available as IZA Discussion Paper 11129.