The retrospective evaluation of payment sequences: duration neglect and peak-and-end effects

In this paper, we present the results of two experimental studies that examine the quality of retrospective evaluations of payment sequences. In line with a large body of evidence on biases in the retrospective evaluation of hedonic episodes, we observe systematic biases, the tendency to weigh the peak and the end of a sequence too heavily and to neglect its length. However, such effects only show up if we link the payments to performance in strenuous tasks that distract the participants. If payments are simply presented and no distraction is provided, most subjects make normatively appropriate choices.