HOW MANY PAYCHECKS? AN EXAMPLE OF A SELF-IMPOSED CONSTRAINT

Many faculty members prefer to receive their salary in twenty-four equal payments over the entire year as opposed to receiving the salary sooner, in eighteen equal payments over the academic year. I consider two explanations for this choice: (1) it is chosen to eliminate transactions costs associated with administering a similar plan oneself, or (2) it is chosen as a self-imposed constraint to insure against one's own potential imprudent behavior. The paper provides a test which clearly supports the second alternative.