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Time Discounting and Time Preference: A Critical Review
Abstract
This paper discusses the discounted utility (DU) model: its historical development, underlying assumptions, and "anomalies"--the empirical regularities that are inconsistent with its theoretical predictions. We then summarize the alternate theoretical formulations that have been advanced to address these anomalies. We also review three decades of empirical research on intertemporal choice, and discuss reasons for the spectacular variation in implicit discount rates across studies. Throughout the paper, we stress the importance of distinguishing time preference, per se, from many other considerations that also influence intertemporal choices.
... The temporal aspect of individuals' preference and choice behaviour has received relatively little attention; however, two interesting assumptions-immediate and delayed gratification-have evolved in behavioural economics and cognitive psychology. Whereas immediate gratification explains why individuals tend to discount future rewards (Frederick et al., 2002;O'Donoghue & Rabin, 2000), delayed gratification involves a more nuanced view that includes the role of self-control and impulsivity in decision-making and explains why farsighted individuals tend to postpone favourable outcomes (Mischel, 1974;Loewenstein & Prelec, 1993). However, it is commonly agreed that individuals' choices for immediate or delayed gratification vary across sociodemographic backgrounds and intertemporal choices, such as sequences of multiple outcomes (Frederick et al., 2002;Yonaoka et al., 2022). ...
... Whereas immediate gratification explains why individuals tend to discount future rewards (Frederick et al., 2002;O'Donoghue & Rabin, 2000), delayed gratification involves a more nuanced view that includes the role of self-control and impulsivity in decision-making and explains why farsighted individuals tend to postpone favourable outcomes (Mischel, 1974;Loewenstein & Prelec, 1993). However, it is commonly agreed that individuals' choices for immediate or delayed gratification vary across sociodemographic backgrounds and intertemporal choices, such as sequences of multiple outcomes (Frederick et al., 2002;Yonaoka et al., 2022). For instance, when intertemporal choices involve sequences instead of single outcomes, the former are discounted differently (Frederick et al., 2002;Loewenstein & Prelec, 1993). ...
... However, it is commonly agreed that individuals' choices for immediate or delayed gratification vary across sociodemographic backgrounds and intertemporal choices, such as sequences of multiple outcomes (Frederick et al., 2002;Yonaoka et al., 2022). For instance, when intertemporal choices involve sequences instead of single outcomes, the former are discounted differently (Frederick et al., 2002;Loewenstein & Prelec, 1993). Immediate versus delayed gratification has been widely discussed to understand consumers' preference tendencies when faced with time inconsistency (Hoch & Loewenstein, 1991;Shavitt & Barnes, 2020). ...
... Additionally, a set of review papers exist that provide an overview of the models and methodologies used for measuring time preference or discounting. Frederick et al. (2002) provided an early review of the literature on time preference, discussing the developments in measuring and modelling in this field since the seminal publication of Samuelson (1937). In particular, their work reviews a set of anomalies that violate constant discounting models, as well as alternative models that may be used (see Section 2). ...
... Table 1 in their paper includes all published studies measuring discounting; approximately 40 studies published between 1978 and 2002 (also see the meta-analysis of these studies by Percoco & Nijkamp (2009)). Yet, two decades later, the literature on time preference has grown substantially, suggesting that the seminal review by Frederick et al. (2002) needed updating. Indeed, in such an updated review, Cohen et al. (2020) include 222 publications extracted from a single database. ...
... However, many empirical studies have shown that constant discounting does not adequately represent intertemporal preferences (Frederick et al., 2002). Instead, many respondents show a tendency to be more impatient for outcomes received in the near future than for outcomes in the far future, or in other words they are decreasingly impatient. ...
Discount rates play a pivotal role in various fields, capturing the trade-off between present and future, influencing predictions of unhealthy behaviors. Despite substantial variations in discount rates across studies, methods, and individuals, our goal was to systematically overview diverse methods for measuring discount rates. We conducted a comprehensive literature review across multiple databases, targeting English studies introducing and utilizing discounting measurement methods in human subjects. Two authors screened titles and abstracts, with full text review split between them. Extracted data encompassed bibliographic details, theoretical aspects (e.g., discount function), and operational features (e.g., elicitation procedure). After deduplication, 4976, 218, and 83 records underwent title and abstract screening, full text screening, and inclusion, respectively. A total of 86 unique methods were identified. Predominantly, methods were devised for money (75%) and health (22%) discounting. Network analysis on citations indicated limited cross-disciplinary overlap. Only about one fourth, one third, and one third of methods possessed theoretically desirable traits: i) allowance for negative discount rates, ii) application of multiple discount functions, and iii) correction for non-linear utility of outcomes. Diverse discounting measurement methods exist, showcasing varied theoretical and operational characteristics. These differences may stem from the isolation of development in fields like psychology, experimental economics, and health economics. Our systematic review aids readers in choosing methods aligned with their priorities when measuring discount rates.
... Intertemporal choice refers to a decision that involves tradeoffs between immediate and delayed rewards (Chen & He, 2021;Frederick et al., 2002;Loewenstein & Elster, 1992;Ren et al., 2015), such as spending money now or saving it to spend later. In real life, many important intertemporal decisions are made by groups of decision-makers rather than by individuals, for example, boards of directors deciding upon their firms' investment strategies, household members collectively deciding on savings or educational choices, and real estate heirs jointly deciding on decoration investments. ...
... People usually prefer an immediate payoff against a delayed one with the same amount. This phenomenon is called delay discounting, as the value of the payoff declines as its fulfillment is delayed into the future (Bickel et al., 2007;Frederick et al., 2002;Green & Myerson, 2004;Kirby et al., 1999;Madden & Bickel, 2010). The higher the delay discounting, the more people prefer the SS reward, while the lower the delay discounting, the more people prefer the LL reward. ...
Many real-world intertemporal decisions involve a group of two or more individuals making consensual decisions through group collaboration. Here, we ask how group collaboration affects intertemporal choices. In two experiments, participants completed intertemporal choices individually first (the precollaboration phase). Then, participants were placed into groups of two or three and completed a similar intertemporal task, with the group arriving at a consensual decision on each trial (the group collaboration phase). Finally, participants once again completed the intertemporal choices individually (the postcollaboration phase). Results showed that after group collaboration, the delay discounting significantly decreased compared to before collaboration both at group level and at individual level. The effect of group collaboration on individual intertemporal choices was no longer discernible by 1 week later. Therefore, the current research demonstrates the effectiveness of group collaboration and provides a way to nudge both groups and individuals to make farsighted choices.
... Their willingness to pay in advance depends on how they discount the future utility of the product, and a common assumption in economic theory is that the discount factor declines exponentially (Camerer and Loewenstein, 2004). Furthermore, literature reviews by Frederick et al. (2002) and Ö zer and Zheng (2012) show that several studies have found a size effect in time discounting, i.e., small outcomes are discounted more than large ones. ...
... In addition, we want to test how the framing of the early-bird offer influences the perceived fairness. According to Frederick et al. (2002), gains are discounted at a higher rate than losses, and this anomaly has a close relationship with framing effects implied by prospect theory ((Özer and Zheng, 2012, p. 8). Hence, we propose the following hypothesis. ...
... A second example concerns temporal discounting in which people tend to accept smaller sums of money sooner compared to larger sums of money later. Temporal discounting is thought to be inextricably linked with self-control (e.g., Ainslie, 1975;Ballard et al., 2017;Frederick et al., 2002). Economic theories often posit an exponential discount curve in which the discount rate stays constant over time. ...
... This general phenomenon is referred to as temporal discounting and has been applied to lapses in willpower, health outcomes, consumption choices over time, and personal finance decisions. Unsurprisingly, temporal discounting is thought to be inextricably linked with self-control (e.g., Ainslie, 1975;Ballard et al., 2017;Frederick et al., 2002). ...
Self-control is core to human well-being. However, the lack of a well-specified, computationally tractable framework related to self-control makes it difficult to clarify underlying mechanisms, interpret relevant empirical phenomena, or develop interventions helpful in promoting self-control. To help address this gap, we invite consideration of the Comparison with Goal States Model (CGSM) for self-control. The CGSM amplifies activations related to available options whose representations are similar to representations of relevant goals and diminishes activations related to available options whose representations are dissimilar to representations of relevant goals. For example, influenced by healthy eating goals, the CGSM would amplify activations related to an apple and diminish activations related to a cookie, leading to an eventual preference for the apple, even though the cookie might be initially preferred. The CGSM successfully explicates observations related to reaction time in food choice, dynamics reflected in mouse-tracking trajectories, and showcases a mechanism by which hyperbolic discount curves in temporal discounting contexts might emerge. We use the CGSM to propose theoretical constraints on the nature of self-control and describe how multiple strategies have the potential to promote self-control.
... Likewise, a rise in β corresponds to a rise in β prompts household to prioritise future consumption to a higher degree. It is reasonable to assume that β ∈ (0, 1), as suggested by Frederick et al. (2002), this indicates that the family is 'enjoying the excitement produced by the prospect of immediate consumption'. 10 In a special instance, β = 0 implies the household does not care about the future consumption, only concerned about the period 1 consumption. ...
... For a broad understanding of the history of time discounting and time preference, seeFrederick et al. (2002). ...
The debate in the realm of public policy in reducing child labour and enhancing human capital formation encompasses various dimensions. Specifically, many scholarly works put focus on the cash transfer policy as a policy response to address child labour and fostering human capital development. In the domain of multi-sector general equilibrium, a wide range of scholarly works put focus on the policy responses for child labour and human capital formation. The majority of literature puts the primary emphasis on a child’s schooling time as the only factor affecting human capital formation. However, it is recognised that educational expenditure also plays a pivotal role in human capital formation. Against this backdrop, this chapter seeks to theoretically examine the impact of cash transfer policy on both child labour and human capital formation by considering a specific form of human capital function, where human capital is intricately connected to both child's schooling time and educational expenditure. By doing so, first, this chapter incorporates a two-period intertemporal household optimization framework. Secondly, a hybrid general equilibrium model has been adopted, incorporating both Jones (1965) and (1971). Third, the effects of cash transfer policy not only on child labour supply but also on educational spending and the formation of human capital are examined using a general equilibrium framework. Finally, a numerical analysis has elucidated the complex findings. It is found that cash transfer policy may produce counterproductive outcomes in tackling the problem of child labour and improving human capital formation. Furthermore, it is found that the initial condition with respect to the magnitude of the child labour problem in the economy determines the policy's effectiveness. The findings suggest some instances where the policymakers might face a trade-off where the policy produces favourable outcomes in terms of increased human capital formation at the cost of raising the incidence of child labour.
... Researchers have noted that people's temporal orientations can be influenced by their mating motivations. For instance, men who viewed physically attractive women (Wilson & Daly, 2004) and women wearing swimsuits or lingerie (Kim & Zauberman, 2013;Van den Bergh et al., 2008) preferred a smaller sum of money immediately rather than a larger sum later-a phenomenon known as temporal discounting (Frederick et al., 2002). Conversely, neither men exposed to unattractive women nor women exposed to either attractive or unattractive men discounted the future (Wilson & Daly, 2004). ...
... Temporal discounting refers to a decline in the subjective value of reward with increasing delay until its receipt (Frederick et al., 2002). This economic tradeoff reflects decisions that humans face of consuming in the present versus investing for the future. ...
Studies have shown that men discount the future and prefer immediate-but-smaller over delayed-but-larger rewards when exposed to mating opportunities (e.g., attractive opposite-sex targets) or threats (e.g., same-sex competition) whereas women's discounting in response to similar cues appears mixed, suggesting that mating-motivated discounting is primarily a male phenomenon. Importantly, this line of research has not yet examined the role of individual difference variables as well as how the attractiveness of potential mates and perceptions of competition jointly influence discounting rates. We conducted a novel test of the effect of trait intrasexual competitiveness (ISC) using dating profiles varying on target attractiveness and same-sex competition to observe their interactive effects on participants' discounting. Results showed that when targets were attractive , higher ISC was associated with steeper discounting for both men and women, and this association was stronger when competition was high rather than low. ISC still predicted discounting when targets were low in attractiveness but competition was high; high ISC did not predict discounting only in the low attractiveness and low competition condition. These findings reveal ISC as a factor that leads women to discount as much as men, and that high-ISC individuals may be more responsive to competition than to target attractiveness.
... Firm managers, who usually have short-term career concerns, tend to avoid innovation and engage in routine tasks with lower risks and quicker payoffs. This leads to a typical managerial myopia issue and an agency conflict between managers and shareholders (Baysinger et al. 1991;Frederick et al. 2002). Concentrated ownership in the Chinese capital market also gives rise to conflicts of interest between controlling and minority shareholders, which are of greater concern than manager-shareholder conflicts because of the weak institutions and mechanisms to protect minority shareholders and monitor controlling shareholders (Dyck & Zingales 2004;Chen et al. 2014b). ...
... Firm innovation is conducive to improving firms' long-term financial performance and promoting firm value (Gu 2005;Hall et al. 2005). However, because of its risky, unpredictable, and long-term nature, managers, who usually have short-term career pressures, tend to be myopic and refrain from innovative projects (Holmstrom 1989;Frederick et al. 2002). Agency theory suggests that the agency costs associated with innovation tend to be high between shareholders and myopic managers, and that managers' underinvestment in innovation is likely to be significant (Jensen & Meckling 1976;Holmstrom 1989Holmstrom , 1999. ...
Using a stacked difference-indifferences design, we examine how exogenous reductions in analyst coverage arising from brokerage mergers and closures affect firm innovation in China. We find that firms affected by brokerage mergers or closures experience a reduction in innovation quantity, quality, investment, and efficiency. A content analysis of analyst reports reveals that exogenous analyst losses lead to reduced analyst coverage of firm innovation, and that a loss of analysts who issue innovation-related reports drives the negative effect of analyst losses on firm innovation. In addition, we show that analyst losses have a negative effect on firms' information environments and access to external financing, which we confirm are important determinants of firm innovation. Furthermore, these negative effects are driven by firms with weaker information environments and more severe agency conflicts, which experience a greater deterioration of their information environment and access to external financing following the analyst losses. Finally, we show that analyst losses do indeed lead to negative economic consequences, as evidenced by reduced sales growth, market share growth, and firm value, suggesting that innovation outputs are economically valuable in China. Overall, our evidence suggests that in the context of emerging markets, analysts can play a crucial role in shaping firm innovation by covering firms' innovation activities and thereby reducing information asymmetry and mitigating agency conflicts with respect to innovation.
... Present bias and time-inconsistent behavior have long been significant research themes in behavioral economics [6,8,24]. Present bias is modeled by time discount functions. ...
... It is well-known in behavioral economics that the behavior of individuals with exponential discounting is time-consistent, while that of individuals with hyperbolic discounting is time-inconsistent [8]. The results in this section demonstrate that our model successfully reproduces these insights in behavioral economics. ...
Present bias, the tendency to overvalue immediate rewards while undervaluing future ones, is a well-known barrier to achieving long-term goals. As artificial intelligence and behavioral economics increasingly focus on this phenomenon, the need for robust mathematical models to predict behavior and guide effective interventions has become crucial. However, existing models are constrained by their reliance on the discreteness of time and limited discount functions. This study introduces a novel continuous-time mathematical model for agents influenced by present bias. Using the variational principle, we model human behavior, where individuals repeatedly act according to a sequence of states that minimize their perceived cost. Our model not only retains analytical tractability but also accommodates various discount functions. Using this model, we consider intervention optimization problems under exponential and hyperbolic discounting and theoretically derive optimal intervention strategies, offering new insights into managing present-biased behavior.
... The assumed population shares for dynasties 1, 2, and 3 are 14%, 51%, and 35%, respectively. 3 Concerning (1-p), a value of 0.7 is assumed according to actuarial tables, while = 0.5 , based on the middle value in Fig. 1a of Frederick et al. (2002). Based on Piketty (2011), the parameter values of 1 and 2 imply that the first dynasty's bequest is seven times the middle dynasty's bequest. ...
Families are widely recognized as crucial agents in the transmission of wealth, contributing to the perpetuation of inequality and limiting mobility across income levels. To address the economic dynamics behind this phenomenon, classical economists have explored potential solutions through government tax-transfer systems. One such proposal, advanced by Eugenio Rignano, suggests imposing higher taxes on inheritances passed down through multiple generations within a family. To analyze this idea, a model is developed that incorporates both altruistic and accidental bequests, with altruistic bequests playing a crucial role in wealth transmission. The model considers the potential disincentives that inheritance taxation might create for savings intended for altruistic bequests, as well as the benefits of taxing accidental bequests. The novelty of the model lies in its characterization of optimal inheritance taxes when there is an interaction between parents' educational decisions for their children and the transmission of wealth. Simulations suggest that adopting Rignano's proposed tax scheme enhances social welfare compared to the commonly used proportional inheritance tax. These findings suggest that Rignano's tax scheme warrants further research and policy discussion.
... This tendency to weigh immediate rewards higher than future consequences (O'Donoghue and Rabin 1999) (O'Donoghue and Rabin 1999) has been described as a "present bias" (O'Donoghue and Rabin 2015). In empirical studies investigating this effect (see the extensive overview by Frederick, Loewenstein et al. 2002), participants are typically confronted with the choice of either receiving a smaller amount of money immediately or a larger amount at a later point in time. ...
Many social ills can be modelled as a public bad. In such scenarios, private benefit is often immediate while the public damage takes some time to materialize. In this experiment, we investigate the behavioral effects caused by such delays in the realization of collective harm. By manipulating the weight with which the damages caused by group contributions are carried over to the next round, we alter the number of periods required for the social damage to fully unfold. We keep constant the economic consequences of contributions between treatments (by introducing a multiplier for the damage) and between periods (by deducting all unrealized harm at the end of the game) to avoid multiple equilibria. In a second treatment dimension, we isolate the cognitive challenges of this experiment by replacing human group-members with "computerized players" which perfectly copy each subject's previous behavior. We find that participants' behavior is less cooperative over time when harm is deferred into the future. Our results also suggest that the driving mechanism behind this effect is not insufficient anticipation, but the lack of having experienced the negative consequences of the public damage.
... In addition to exploring the psychological states following trauma, the current study aimed to investigate the effect of the indirect experience of an earthquake trauma on two temporal dimensions: intertemporal decision-making and time perspective. Intertemporal decision-making refers to the process of making decisions that involve trade-offs between gains or losses at different points in time (Frederick, Loewenstein, and O'Donoghue 2002). The typical task is the delay discounting task (DDT), in which people are asked to choose between a sooner but smaller gain and a later but larger gain. ...
Turkey experienced two devastating earthquakes, which resulted in more than 50,000 deaths and millions of injured and homeless individuals. The negative influence of direct exposure to trauma has been proven, but the impact of indirect exposure remains unclear. In this study, we focused on indirect types of trauma exposure: the loss of someone in the earthquake and the exposure to disaster media. We aimed to explore the influence of these dimensions on psychological states, including earthquake trauma severity, post-traumatic stress disorder (PTSD) symptoms, depression, anxiety, hopelessness and life satisfaction and temporal-psychological measures, such as intertemporal decision-making tendencies and time perspectives. The sample (N = 215) consisted of Turkish individuals who experienced the earthquakes through two types of indirect exposure: having lost someone and being exposed to disaster media. Findings showed that having a loss in the earthquake was related to high levels of trauma, anxiety, hopelessness and a past-negative time perspective. Repetitive exposure to disaster media was linked to higher levels of trauma, PTSD symptoms, depression, anxiety, stress and a past-negative time perspective. Importantly, the amount of traumatization in case of losing someone was modulated by the frequency of disaster-media exposure. Even indirect exposure to the disaster substantially disturbs many processes, and the media magnifies such disturbances.
... We estimated an individual's temporal discounting following a well-established one-parameter model. This model regards the value of a present, subjective reward (V) as a hyperbolic function of delay (D) according to the formula V = A / (1 + kD), where A denotes the amount of the delayed (objective) reward and k represents an individual-specific rate of temporal discounting (Frederick et al., 2002;Green & Myerson, 2004;Kirby & Maraković, 1996). Here, a higher k-value represents a greater preference for an impulsive decision to choose a more present reward, and lower k-values imply an individual's greater tendency to delay gratification. ...
Social exclusion impairs decision-making, affecting social functioning. This study examines how social exclusion — in both short- and long-term — influences intertemporal decision-making, and whether transcranial direct current stimulation (tDCS) can mitigate these negative effects. Experiment 1 (n = 131) found that immediately excluded individuals favored immediate rewards. Experiment 2 (n = 62) demonstrated that applying anodal tDCS to the right ventrolateral prefrontal cortex (vlPFC) reduced this preference. Chronic exclusion also led to a preference for immediate rewards (Experiment 3, n = 170), but multiple anodal tDCS sessions in the right vlPFC lessened this effect, suggesting long-term benefits (Experiment 4, n = 36). We discuss how self-control mediates the link between exclusion and intertemporal decision-making, and highlight tDCS as a potential therapeutic tool for socially excluded individuals.
... Its fundamentals are given by Arrow (1971). The study of dynamic games cannot be separated from the study of time preferences and time discounting (Frederick, Loewenstein, O'Donoghue 2002). Risk aversion can be thus modeled either as the modification of probabilities ("risk-neutral probabilities") or as the modification of discount rate ("risk premium"). ...
We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of adjustment of their estimation of probabilities when calculating the expected value (ensemble average). It means that their subjective probabilities evolve in such a way that economic agents tend to assign lower probabilities to "good" events and higher probabilities to "bad" events. These subjective probabilities can be derived analytically by assuming that economic agents care about time average, not the ensemble average. Probabilities calculated based on this assumption are equal to the probabilities we get in evolutionary simulation. Furthermore, it appears that these subjective probabilities are equal to risk-neutral probabilities in mathematical finance. Hence, by taking into account that the environment in which economic agents operate is non-ergodic, we are able to calculate risk-neutral probabilities that are consistent with modern finance theory but are derived in a conceptually different way. It means that when we assume that agents try to predict time average, not ensemble average, the need for the concept of risk aversion disappears, since there is no distortion of subjective probabilities. Evolutionary simulations are quite a general method that can be applied for the determination of relevant measures of the outcome of a gamble under various conditions.
... Prominent accounts of cost-benefit decisions assume that humans decide between reward options by comparing the subjective values of the options [2][3][4][5] . In both intertemporal and interpersonal decisions, the subjective value of an option is thought to integrate reward magnitudes and costs according to hyperbolic functions: In intertemporal decisions, the subjective value of a reward declines hyperbolically with increasing time of reward delivery 6,7 , whereas the value of sharing money with others is hyperbolically reduced with increasing social distance of the benefitted person [8][9][10] . A large body of evidence suggests that the subjective values of delayed and shared rewards correlate with activation in the neural reward system, including the striatum and ventromedial prefrontal cortex (VMPFC) 4,9,[11][12][13][14] . ...
A core assumption in decision neuroscience is that individuals decide between options by comparing option-specific subjective reward values. Psychological accounts challenge this view and suggest that decisions are better explained by comparisons between choice attributes than by comparisons between option-specific values, casting doubts on the interpretation of activation in the neural reward system as subjective value signals. Here, we provide neuroimaging and pharmacological evidence that value-related neural activity follows the value comparison strategy employed by an individual on the psychological level. Neural model comparisons reveal that activation in the striatum, rather than generally reflecting attribute-wise or option-wise value comparisons, reflects the value comparison strategy that provides the best explanation for an individual’s choice behavior. Strikingly, manipulating activation in the dopaminergic reward system reveals that dopamine antagonism counteracts the engagement in an individual’s dominant value comparison strategy. Together, our findings provide evidence for the biological plausibility of psychological accounts of decision making and emphasize the importance of neural model comparisons to prevent misinterpretations of brain activation.
... The decision-making process, after comparing and weighing costs and benefits at various points in time, is known as inter temporal choice (IDM) (Frederick et al., 2002). To examine people's intertemporal preferences, researchers frequently ask them to choose between a smaller sooner (SS) option (Greenberg et al., 1994;Liu & Smeesters, 2010). ...
The COVID-19 pandemic in 2020 led to a notable increase in mortality data, impacting various facets of life. This study investigated the impact of mortality awareness on decision-making and intertemporal preferences amidst the prevailing death-related environment. Three experiments were conducted to assess how mortality salience and death-related information influence intertemporal choices and the role of food tastes in this context. Experiment 1 used a mortality salience paradigm to study changes in intertemporal decision-making under mortality awareness. Experiment 2 analyzed how characteristics of death messages and the nature of death events affect self-involvement and intertemporal choices. Experiment 3 aimed to examine if different food flavors could act as a defense mechanism against death-related effects, influencing intertemporal decisions. The results showed that (1) Compared to the control group, the death-accentuated group preferred small and immediate rewards when making intertemporal choices. (2) Individuals showed high delay discount rates and preferred instant gratification for both accidental death events and when the main character of the death event was themselves. (3) Moreover, those who experienced mortality salience and consumed sweets or water showed increased willingness to opt for delayed gratification, demonstrating lower delay discount rates and higher patience. The results of the study show that food taste acts as a proximal defense mechanism against the negative impacts of mortality salience on decision-making, prompting individuals facing death to prioritize delayed gratification over immediate gains.
... Put differently, we value positive outcomes more if they occur now rather than later, and the negative impact of future events seems to diminish the further away they are. This effect of time discounting grows stronger with increasing time intervals, influencing immediate decisions (Frederick et al., 2002). In digital media and online privacy, this translates to users favoring short-term advantages over potential long-term risks, showing a preference for immediate rewards and less concern for future consequences, a trait common in those with a present-focused orientation (Lünich et al., 2021). ...
As artificial intelligence (AI) becomes more integrated into society, concerns have arisen about unintended biases in AI-driven decision-making and the environmental impact of AI technology development. AI assistants such as Siri and Alexa, while helpful, can obscure decision-making and contribute to increased energy use and CO2 emissions. The present study explores whether consumers prioritize transparency and environmental sustainability over performance when choosing AI assistants with conjoint designs. Japanese participants were presented with different AI assistant profiles, varying in performance quality, transparency, cost, and environmental efficiency. The results revealed that Japanese participants prioritized transparency over performance when choosing AI assistants, but they prioritized performance over environmental sustainability. Moreover, future-oriented participants placed more importance on sustainability than those with a present orientation, while participants with an internal locus of control valued transparency more than those with an external locus of control. The findings of this study enhance our understanding of how consumers choose AI options and offer valuable guidance for creating AI systems and communication strategies that work effectively.
... Temporal discounting leads decision-makers to prioritize immediate, smaller gains over potentially greater future benefits. This bias often guides the selection of ERP solutions that promise immediate cost savings but may necessitate costly future modifications due to their lack of scalability (Frederick et al., 2002;Dittmar and Bond, 2010). Specifically, temporal discounting causes decision-makers to undervalue long-term outcomes, focusing instead on short-term achievements and the immediate impact of their choices. ...
Purpose
The purpose of this study is to address a critical gap in enterprise resource planning (ERP) implementation process for small and medium-sized enterprises (SMEs) by acknowledging and countering cognitive biases through a cognitive bias awareness matrix model. Cognitive biases such as temporal discounting and optimism bias often skew decision-making, leading SMEs to prioritize short-term benefits over long-term sustainability or underestimate the challenges involved in ERP implementation. These biases can result in costly missteps, underutilizing ERP systems and project failure. This study enhances decision-making processes in ERP adoption by introducing a matrix that allows SMEs to self-assess their level of awareness and proactivity when addressing cognitive biases in decision-making.
Design/methodology/approach
The design and methodology of this research involves a structured approach using the problem-intervention-comparison-outcome-context (PICOC) framework to systematically explore the influence of cognitive biases on ERP decision-making in SMEs. The study integrates a comprehensive literature review, empirical data analysis and case studies to develop the Cognitive Bias Awareness Matrix. This matrix enables SMEs to self-assess their susceptibility to biases like temporal discounting and optimism bias, promoting proactive strategies for more informed ERP decision-making. The approach is designed to enhance SMEs’ awareness and management of cognitive biases, aiming to improve ERP implementation success rates and operational efficiency.
Findings
The findings underscore the profound impact of cognitive biases and information asymmetry on ERP system selection and implementation in SMEs. Temporal discounting often leads decision-makers to favor immediate cost-saving solutions, potentially resulting in higher long-term expenses due to the lack of scalability. Optimism bias tends to cause underestimating risks and overestimating benefits, leading to insufficient planning and resource allocation. Furthermore, information asymmetry between ERP vendors and SME decision-makers exacerbates these biases, steering choices toward options that may not fully align with the SME’s long-term interests.
Research limitations/implications
The study’s primary limitation is its concentrated focus on temporal discounting and optimism bias, potentially overlooking other cognitive biases that could impact ERP decision-making in SMEs. The PICOC framework, while structuring the research effectively, may restrict the exploration of broader organizational and technological factors influencing ERP success. Future research should expand the range of cognitive biases and explore additional variables within the ERP implementation process. Incorporating a broader array of behavioral economic principles and conducting longitudinal studies could provide a more comprehensive understanding of the challenges and dynamics in ERP adoption and utilization in SMEs.
Practical implications
The practical implications of this study are significant for SMEs implementing ERP systems. By adopting the Cognitive Bias Awareness Matrix, SMEs can identify and mitigate cognitive biases like temporal discounting and optimism bias, leading to more rational and effective decision-making. This tool enables SMEs to shift focus from short-term gains to long-term strategic benefits, improving ERP system selection, implementation and utilization. Regular use of the matrix can help prevent costly implementation errors and enhance operational efficiency. Additionally, training programs designed around the matrix can equip SME personnel with the skills to recognize and address biases, fostering a culture of informed decision-making.
Social implications
The study underscores significant social implications by enhancing decision-making within SMEs through cognitive bias awareness. By mitigating biases like temporal discounting and optimism bias, SMEs can make more socially responsible decisions, aligning their business practices with long-term sustainability and ethical standards. This shift improves operational outcomes and promotes a culture of accountability and transparency. The widespread adoption of the Cognitive Bias Awareness Matrix can lead to a more ethical business environment, where decisions are made with a deeper understanding of their long-term impacts on employees, customers and the broader community, fostering trust and sustainability in the business ecosystem.
Originality/value
This research introduces the original concept of the Cognitive Bias Awareness Matrix, a novel tool designed specifically for SMEs to evaluate and mitigate cognitive biases in ERP decision-making. This matrix fills a critical gap in the existing literature by providing a structured, actionable framework that effectively empowers SMEs to recognize and address biases such as temporal discounting and optimism bias. Its practical application promises to enhance decision-making processes and increase the success rates of ERP implementations. This contribution is valuable to behavioral economics and information systems, offering a unique approach to integrating cognitive insights into business technology strategies.
... For example, a person might choose to indulge in immediate consumption rather than saving, which results in lower wealth accumulation and less financial security in the future [13,15]. Theories on present bias and myopic preferences also illustrate how individuals make investment and savings decisions that produce shortterm gains [16,17] that lead to over-consumption, procrastination, and insufficient investment in long-term projects [13,18]. ...
Hyperbolic discounting is a psychological phenomenon in which individuals prioritize smaller immediate rewards over larger future rewards. Time-inconsistent behavior is deemed irrational as it negatively impacts savings and investment, investment in financial knowledge, and long-term financial and personal well-being. This study hypothesizes that improving financial knowledge, promoting positive financial behavior, and fostering a future-oriented financial attitude can mitigate hyperbolic discounting bias and that these three components of financial literacy enable investors to make long-term economic decisions maximizing utility. We analyzed the responses of 114,170 active investors in Japan to examine the interactions between financial knowledge, behavior, and attitude. Our findings reveal a strong negative relationship between these dimensions and hyperbolic discounting, underscoring their crucial role in shaping individuals’ intertemporal preferences. For researchers, our results highlight the need to integrate multidimensional aspects of financial literacy into investigations of intertemporal discounting behaviors. Policymakers should implement holistic financial education programs that improve knowledge, transform behavior, and shape attitudes. Financial institutions and advisors should prioritize programs that mitigate hyperbolic discounting tendencies among clients. This study represents a significant advancement in the research on financial literacy, offering a comprehensive framework for future studies and practical applications aimed at improving financial decision-making outcomes.
... Such information becomes irrelevant, distracting, or even contradictory to the main goal that has been activated. Nevertheless, it is possible for multiple goals to coexist in a single individual, as evidenced by the literature (Frederick et al., 2002). However, the majority of studies focus on examining a single goal at a time (Bamberg and Schmidt, 2003;Stern, 2000). ...
Introduction
To cope with catastrophic floods, people need to be better prepared. In this context, a self-assessment digital tool for habitat vulnerability was developed. To improve its take-up rate, we are looking at the motivations associated with the social acceptability of this tool. The motivations (hedonic—gain—normative), derived from goal-frame theory, as well as elements relating to risk perception, are tested.
Method
One, 688 participants (aged between 18 and 87) first read a scenario presenting the application (reflecting either one of the motivations of the Goal Framing Theory or a control scenario with no motivation). After reading one of the scenarios, they completed an online questionnaire, measuring the acceptability of the tool using three measures: a direct one (items from the Technological Acceptability Model: ease of use, perceived usefulness and social influence), an indirect measure (by asking the percentage of neighbours interested in the tool) and a social measure (judgement of a person using the tool). The last part of the questionnaire was about subjects’ risk perception.
Results
The analyses show that, of all the scenarios, the one involving hedonic motivation leads to the lowest social acceptance of the tool. We also observe that a better risk perception predicts better tool acceptability. Finally, we observe interaction effects between risk perception and motivations, showing that normative motivation is better when risk perception increases and that the control condition is better when risk perception decreases.
Discussion
Goal framing theory is usually used for ecological behaviors. It also appears here as relevant in the field of risk prevention. Although risk perception remains the best predictor of acceptability, these results lead us to conclude that hedonic motivation is not appropriate for the acceptability of a flood risk prevention tool. It is preferable to focus on normative and gain motivations.
... Understanding how perceptions of the future's indeterminacy impact the outcomes assessment is crucial. Intertemporal choice theory, whose mathematical reference model is the Discounted Utility Model (DUM) (Samuelson, 1937(Samuelson, , 1952, provides a quantitative and qualitative approach for describing intertemporal discounting, i.e., when decisions involving trade-offs among costs and benefits occur at different times (Frederick et al., 2002). The characteristics of intertemporal discounting are related to individual aspects such as psychological, socio-demographic, and genetic variables (Keidel et al., 2021). ...
Classical finance models are based on the premise that investors act rationally and utilize all available information when making portfolio decisions. However, these models often fail to capture the anomalies observed in intertemporal choices and decision-making under uncertainty, particularly when accounting for individual differences in preferences and consumption patterns. Such limitations hinder traditional finance theory's ability to address key questions like: How do personal preferences shape investment choices? What drives investor behaviour? And how do individuals select their portfolios? One prominent contribution is Pompian's model of four Behavioral Investor Types (BITs), which links behavioural finance studies with Keirsey's temperament theory, highlighting the role of personality in financial decision-making. Yet, traditional parametric models struggle to capture how these distinct temperaments influence intertemporal decisions, such as how individuals evaluate trade-offs between present and future outcomes. To address this gap, the present study employs Functional Data Analysis (FDA) to specifically investigate temporal discounting behaviours revealing nuanced patterns in how different temperaments perceive and manage uncertainty over time. Our findings show heterogeneity within each temperament, suggesting that investor profiles are far more diverse than previously thought. This refined classification provides deeper insights into the role of temperament in shaping intertemporal financial decisions, offering practical implications for financial advisors to better tailor strategies to individual risk preferences and decision-making styles.
... For the model-based analysis, we fitted hyperbolic discount functions to the choice data in a hierarchical Bayesian fashion using the JAGS software package (Plummer, 2003). We assumed that the subjective value of delayed rewards can be described by a canonical hyperbolic discount function (Frederick, Loewenstein, & O'Donoghue, 2002;Laibson, 1997): ...
Delaying gratification in value-based decision making is canonically related to activation in the dorsolateral prefrontal cortex (dlPFC), but past research neglected that the dlPFC is part of a larger frontoparietal network. It is therefore unknown whether the dlPFC causally implements delay of gratification in concert with posterior parts of the frontoparietal network rather than in isolation. Here, we addressed this gap by testing the effects of frontoparietal theta synchronization and desynchronization on impulsive decision making using transcranial alternating current stimulation (tACS). Healthy participants performed an intertemporal choice task and a 3-back working memory task while left frontal and parietal cortices were stimulated with a 5 Hz theta frequency at in-phase (synchronization), anti-phase (desynchronization), or sham tACS. We found frontoparietal theta coupling to improve working memory performance, while in the decision task desynchronization was associated with more impulsive choices and stronger hyperbolic discounting of future rewards. Overall, our findings overcome the past focus of the dlPFC in isolation and show that patient decision making causally relies on synchronous activation in a frontoparietal network related to working memory.
... However, since decisions generally include a time frame, this is an aspect that should also be analyzed. As stated by Frederick et al. (2002), the time-discounting occurs when people value more immediate rewards than future ones. The opposite has been studied too, this is, rewards when provided with delay (Skylark et al., 2020). ...
... Sequential self-control failures Self-control failures can be understood in at least two ways: sequentially and in parallel (Read 2008). 5 Most of the economic inter-temporal choice literature on present bias and instant gratification uses the sequential definition and understands self-control failures as dynamic inconsistencies where people's preferences change nearer to the decision time from preferring a larger later reward to preferring a smaller sooner reward (Ainslie 1975;Laibson 1997;Frederick et al. 2002;Ericson and Laibson 2019). In this literature, selfcontrol is about "the present" versus "the future" and self-control failures are present when individuals act against previously made plans. ...
The existence of self-control failures is often used to legitimize public policy interventions. The argument is that reducing self-control failures can make people better off, as judged by themselves. However, there is only scarce evidence on the frequency and welfare costs of self-control failures. This paper presents a survey method that allows us to measure self-control failures in everyday life and to identify their welfare costs in terms of associations with experienced subjective well-being. We present novel survey evidence using this method and discuss its implications for behavioural welfare economics and behavioural public policy.
... Time preference refers to a preference such that one would prefer a gain of the same amount in the present to a gain of a certain amount in the future. Economic and psychological research on time preference has shown that many people prefer small present gains to large future gains (i.e., they value future gains at a discount) [24] [25]. And it is said that as people get older, their time discount rate increases, i.e., their tendency not to wait increases, and they tend to estimate the value of a year in the future at a higher rate [26] [27]. ...
The aging rate in Japan is 29.0% as of 2022, and it is rising due to the decrease in the total pop-ulation and the increase in the population aged 65 and over. It is significant to clarify what characteristics are present in the decision-making and behavior of the elderly. Therefore, this study conducts interviews with the elderly and qualitatively analyzes the data obtained to ex-amine the factors that influence the decision-making of the elderly.
... We follow a large literature in experimental economics that uses incentivized choice experiments to elicit preference parameters (29)(30)(31). A few studies have been able to link experimental data to administrative records at the individual level and in this way analyze whether elicited preferences of people predict differences in their real-life choices and outcomes (32,33). ...
Rising inequality has brought redistribution back on the political agenda. In theory, inequality aversion drives people’s support for redistribution. People can dislike both advantageous inequality (comparison relative to those worse off) and disadvantageous inequality (comparison relative to those better off). Existing experimental evidence reveals substantial variation across people in these preferences. However, evidence is scarce on the broader role of these two distinct forms of inequality aversion for redistribution in society. We provide evidence by exploiting a unique combination of data. We use an incentivized experiment to measure inequality aversion in a large population sample (≈9,000 among 20- to 64-y-old Danes). We link the elicited inequality aversion to survey information on individuals’ support for public redistribution (policies that reduce income differences) and administrative records revealing their private redistribution (real-life donations to charity). In addition, the link to administrative data enables us to include a large battery of controls in the empirical analysis. Theory predicts that support for public redistribution increases with both types of inequality aversion, while private redistribution should increase with advantageous inequality aversion, but decrease with disadvantageous inequality aversion. A strong dislike for disadvantageous inequality makes people willing to sacrifice own income to reduce the income of people who are better off, thereby reducing the distance to people with more income than themselves. Public redistribution schemes achieve this but private donations to charity do not. Our empirical results provide strong support for these predictions and with quantitatively large effects compared to other predictors.
... Hyperbolic discounting [13] is a leading candidate [1], [6], [8] for explaining the common difference effect. The value of a strategyπ under this discounting model is ∞ n=0 b n r n , where r n is defined as before and b n = (1 + κ 1 n) −κ2/κ1 for some κ 1 , κ 2 > 0. However, this form of discounting is quite complicated, making its study hard. ...
Reinforcement learning has traditionally been studied with exponential discounting or the average reward setup, mainly due to their mathematical tractability. However, such frameworks fall short of accurately capturing human behavior, which has a bias towards immediate gratification. Quasi-Hyperbolic (QH) discounting is a simple alternative for modeling this bias. Unlike in traditional discounting, though, the optimal QH-policy, starting from some time can be different to the one starting from Hence, the future self of an agent, if it is naive or impatient, can deviate from the policy that is optimal at the start, leading to sub-optimal overall returns. To prevent this behavior, an alternative is to work with a policy anchored in a Markov Perfect Equilibrium (MPE). In this work, we propose the first model-free algorithm for finding an MPE. Using a two-timescale analysis, we show that, if our algorithm converges, then the limit must be an MPE. We also validate this claim numerically for the standard inventory system with stochastic demands. Our work significantly advances the practical application of reinforcement learning.
... Hyperbolic discounting [13] is a leading candidate [1], [6], [8] for explaining the common difference effect. The value of a strategyπ under this discounting model is ∞ n=0 b n r n , where r n is defined as before and b n = (1 + κ 1 n) −κ2/κ1 for some κ 1 , κ 2 > 0. However, this form of discounting is quite complicated, making its study hard. ...
Reinforcement learning has traditionally been studied with exponential discounting or the average reward setup, mainly due to their mathematical tractability. However, such frameworks fall short of accurately capturing human behavior, which has a bias towards immediate gratification. Quasi-Hyperbolic (QH) discounting is a simple alternative for modeling this bias. Unlike in traditional discounting, though, the optimal QH-policy, starting from some time t1, can be different to the one starting from t2. Hence, the future self of an agent, if it is naive or impatient, can deviate from the policy that is optimal at the start, leading to sub-optimal overall returns. To prevent this behavior, an alternative is to work with a policy anchored in a Markov Perfect Equilibrium (MPE). In this work, we propose the first model-free algorithm for finding an MPE. Using a two-timescale analysis, we show that, if our algorithm converges, then the limit must be an MPE. We also validate this claim numerically for the standard inventory system with stochastic demands. Our work significantly advances the practical application of reinforcement learning.
... Hyperbolic discounting [13] is a leading candidate [1], [6], [8] for explaining the common difference effect. The value of a strategyπ under this discounting model is ∞ n=0 b n r n , where r n is defined as before and b n = (1 + κ 1 n) −κ2/κ1 for some κ 1 , κ 2 > 0. However, this form of discounting is quite complicated, making its study hard. ...
Reinforcement learning has traditionally been studied with exponential discounting or the average reward setup, mainly due to their mathematical tractability. However, such frameworks fall short of accurately capturing human behavior, which has a bias towards immediate gratification. Quasi-Hyperbolic (QH) discounting is a simple alternative for modeling this bias. Unlike in traditional discounting, though, the optimal QH-policy, starting from some time can be different to the one starting from Hence, the future self of an agent, if it is naive or impatient, can deviate from the policy that is optimal at the start, leading to sub-optimal overall returns. To prevent this behavior, an alternative is to work with a policy anchored in a Markov Perfect Equilibrium (MPE). In this work, we propose the first model-free algorithm for finding an MPE. Using a two-timescale analysis, we show that, if our algorithm converges, then the limit must be an MPE. We also validate this claim numerically for the standard inventory system with stochastic demands. Our work significantly advances the practical application of reinforcement learning.
... Theoretical relationship between risk taking and education level is that education enhance a person ability to perceive higher risks and person is not a risk taker. Finding of this study are consistent with the theory and also consistent with the findings of Frederick et al., (2002), Anderson & Mellor, (2008), Lusardi & Mitchell, (2007) and Guiso et al., (2018).The reason is that investment enhances the skills and knowledge which in turn increases the ability to take perceived risks. Another reason is that person has more access to information and socioeconomic factors are more suitable which may enhance the risk perception ability of persons and they would show less risky behavior. ...
Recent studies have suggested that socioeconomic, psychological and demographic factors play an important role for risk taking behavior. These suggestions raise the question that whether all of these variables have positive or negative impact on risk taking behavior. So, this study aims to estimate the impact of these factors on risk taking behavior. Primary data is collected from 642 households of three cities in Punjab as these three cities are representative of Punjab, Pakistan. During economic decision-making, risk-taking behavior is affected by many variables. The results show that variables like Age, head of family, education level, committee system, trust and optimism have significant negative effect on risk taking behavior of households. While influence of others, financial literacy, and impulsivity, location, and stress have significant positive impact on risk taking behavior. Other variables such as gender, marital status, family system, and do not have significant effects on risk taking behavior. The results of this study may help in devising economic and social policies for the improvement of economic decision making. This study would pave ways for the policy makers as how to create strategies to grow economies by thinking and taking microeconomic factors into account like risk taking behavior.
... The first reason is temporal discounting, or the natural tendency to prefer the immediate to the distant future. Studies in behavioural economics and psychology demonstrate that individuals will indeed prioritise their current selves over their future selves (Frederick et al., 2002;Thaler & Sunstein, 2009;Sunstein, 2014), but also current generations over future ones (Frederick, 2003). In microeconomics studies, this led to the emergence of the discounted utility model, according to which people display impatience concerning their own welfare (Samuelson, 1937). ...
This article introduces the concept of political long‐termism, defined as the conscious choice to prioritise the future consequences of today's political actions over their short‐term benefits and emphasises its relevance in the realm of European Studies. It contends that the European Union (EU), in theory, possesses the potential to address creeping crises more effectively than its member states, while acknowledging the varying degrees of support for political long‐termism within different EU institutions. The article advocates for additional research to explore the EU and international organisations' role in fostering political long‐termism, an area that has seen limited empirical investigation. To do so, it proposes five research questions as a starting point to establish political long‐termism as a subdiscipline of European Studies. As such, it aims to set the agenda by shedding light on the intertemporal aspect of EU politics.
... home. 5 There are surveys of time preference (Frederick et al., 2002;Wang et al., 2016) and the elasticity of marginal utility Havránek, 2015;Thimme, 2017), but Drupp's is the only study we know that considers both together. 6 The pure rate of time preference, denoted by , is the rate at which utility is discounted. ...
The majority of estimates of the social cost of carbon use preference parameters calibrated to data for North America and Europe. We here use statistically representative data for attitudes to time and risk across the world. The social cost of carbon is substantially higher in the global north than in the south. The difference is more pronounced if we count people rather than countries.
... Prior research on temporal focus has explored how people make choices when they process the time frame within which a certain event will undoubtedly occur. The findings in terms of intertemporal choice (Loewenstein & Thaler, 1989), temporal construal (Trope & Liberman, 2003), time discounting (Frederick & Loewenstein, 2002), and temporal value asymmetry (Caruso, 2010;Suhler & Callender, 2012) have shown that the perception of an event can change depending on whether it is in the distant or near future, or the distant or recent past. In their research, the effect of temporal distance is discussed within the future or the past period, and the present is rarely used as a reference point. ...
Online knowledge‐sharing platforms construct risk knowledge and provide the audience with risk‐related scientific facts. We study how speakers organize narratives in past, present, and future foci to influence the audience's emotions through the audience's appraisal of motive congruency and coping potential. Empirical evidence from 210 Technology, Entertainment, Design talks about disasters from 2002 to 2018 demonstrates that emphasizing the past, present, and future in risk narrative leads to the audience's comments with more negative, less positive, and more positive emotions, respectively. Concrete (vs. abstract) portrayal of the risk narrative improves the audience's situational awareness, enhances their risk appraisal, and intensifies the impact of temporal focus on emotions, providing evidence of how temporal focus impacts. These findings demonstrate that temporal focus can effectively reduce risk overreaction or ignorance and facilitate emotion regulation in risk communication.
... There is not just one type of representative human agent: people are different. One of the earliest areas of interest for pioneering behavioural economists was the conceptual and empirical analysis of fundamental economic preferences such as risk, time and social preferences, with the immediate recognition that there is indeed a remarkable heterogeneity in human preferences, as witnessed by the many instances of so-called "behavioural anomalies" and "exotic preferences" documented in early studies (Kahneman & Tversky, 1974;Loewenstein & Thaler, 1989;Camerer & Thaler, 1995;Charness & Rabin, 2002;Frederick, et al., 2002;Fehr & Schmidt, 2006;Loewenstein, 2007). ...
Behavioural economics is increasingly recognising the key role of individual heterogeneity in understanding human behaviour. People differ in many ways: preferences, attitudes, beliefs, socio-cultural and economic backgrounds and cognitive responses to external stimuli. Effective behavioural interventions (BIs), designed to influence and change human behaviour, must therefore account for this heterogeneity. Today, there is a spectrum of BIs beyond the popular "nudges" for influencing behaviour, including boosts, thinks and nudge+. Responses to these are complex and varied, driven by numerous psychological mechanisms. We illustrate this point by reviewing experimental evidence from a recent stream of behavioural economics experiments on food choices, which highlights the role of individual heterogeneity in behavioural responses. We recommend that behavioural economists must systematically and holistically test a wide range of BIs, complement the analysis of average treatment effects with localised effects and use computational social science methods to adaptively tailor and test BIs for different population segments.
The average duration of first-instance criminal trials has steadily increased in Italy over the last 20 years. Over the same period, the use of both plea bargaining and penal orders has steadily decreased. This situation contradicts the predictions of the economic models of plea bargaining since longer trials, by imposing higher costs on both prosecutors and defendants, should result in a greater use of trial-avoiding procedures. The phenomenon can be explained by the unique regulation of the Italian statute of limitations: if trials last longer than a certain time threshold, defendants must be acquitted, regardless of the evidence collected against them. Hence, longer trials reduce defendants’ incentives towards the use of trial-avoiding procedures that result in a criminal conviction. In an instrumental variable analysis on a panel of 140 first-instance judicial districts over the period 2005–2021 I find that longer first-instance trials decrease the use of both plea bargaining and penal orders in Italy. The results of the analysis call for a reform of the Italian statute of limitations, considering its perverse effect on defendants’ incentives.
The possible cognitive effect of sense of agency (SoA) has attracted increasing attention. Previous findings suggest that SoA has an effect on action control, time perception, and memory. Here we investigated whether SoA can also influence decision-making. We conducted two experiments, in which we induced high or low predictability by manipulating the contingency between keypresses (action) and ball movements (effect), before assessing SoA and risk-taking (in Experiment 1); and induced both predictability and short or long time delay of action-effect, before assessing SoA, risk-taking, and intertemporal decision-making (in Experiment 2). Higher predictability increased SoA and promoted risk-taking, but did not impact intertemporal decision-making; Shorter delay increased SoA and promoted Larger-Later options, but did not impact risk-taking decision-making. While our findings suggest that some decision-making processes are affected by the same factors as SoA is, we did not find any evidence for any direct impact of SoA on decision-making.
Most research on intertemporal choice has examined choices between smaller, sooner gains and larger, later gains. A much smaller number of papers have examined intertemporal choices for losses. In this article, we explore whether mixed-sign choices with both gains and losses may better correlate with real-world behaviors. In two high-powered studies (pilot: N = 3,200; main study: N = 7,000), participants completed one of four normatively equivalent measures consisting of pure gain, pure loss, or mixed sign (Gain-Now-Loss-Later or Loss-Now-Gain-Later) intertemporal choices. Participants also self-reported a large number of demographic measures and real-world choice behaviors thought to be linked to intertemporal choice. The results indicate that (1) mixed-sign intertemporal choices yield more patient time preferences than pure-gain choices but less patient than pure-loss choices and (2) pure-gain intertemporal choices yield equivalent or superior predictive power across a range of real-world intertemporal choice behaviors.
Human behavior significantly influences infectious disease transmission, yet traditional models often overlook this factor, limiting predictions of disease and the associated socioeconomic impacts. We introduce a feedback-informed epidemiological model that integrates economic decision-making with infectious disease dynamics. Individuals weigh costs and benefits, then choose behaviors that influence their risk of infection and disease progression, thereby shaping population-level dynamics. Applying this model to a scenario based on the early COVID-19 pandemic, we examine decisions to abstain from work to mitigate infection risk. Our findings reveal that feedback between disease and behavior notably affect infection rates and overall welfare, especially when accounting for individual economic and health vulnerabilities, which are often in tension. We evaluate counterfactual policies, including labor restrictions and cash transfers, illustrating how our framework can simultaneously address epidemiological, economic, and equity-related questions. This flexible and extendable modeling framework offers a powerful tool for assessing infectious disease interventions.
Framings may affect individuals' choices. In particular, the perception of (implicit) risks and their costs may influence intertemporal choices. In a between‐subjects experimental design, participants are presented choices either in a standard (i.e., current vs. future payoffs), penalty (i.e., the same as before, presenting the differences between present and future amounts as losses), future‐improved (i.e., increasing by 35% the future payoff with respect to the standard frame) or penalty present‐improved way (i.e., with small differences between present and future amounts). Undergraduate students participated in 3 two‐step experiments. The results show that the negative and the present‐improved frames render the participants more patient and subjects who are trained to be more farsighted using a penalty decision problem continue to be patient in subsequent classical formulations where that specific attribute is no longer present.
Intertemporal decisions are crucial to survival, especially when humans are exposed to ecological threats. However, it remains unclear whether and how pandemic threats impact intertemporal choices across cultures. We conducted two studies in two cultural contexts (N = 1180). Study 1a found that Chinese who perceived more pandemic threats showed higher temporal discounting rates (i.e., preferred immediate smaller over delayed larger rewards), and this relationship was mediated by negative emotions. Study 1b, using threat priming, revealed that Chinese participants primed with a high-threat condition (depicting a pandemic threat) showed higher temporal discounting rates compared to those primed with a low-threat condition (describing the flu). Differently, Study 2a revealed that perceived pandemic threat levels of Americans did not directly predict temporal discounting rates. Using similar threat priming, Study 2b further confirmed that Americans in the high-threat priming condition showed no significant differences in temporal discounting rates compared to those in the low-threat priming condition. The current research deepens the understanding of the cultural difference in the impact of pandemic threats on intertemporal decision-making and further informs the development of interventions that promote individual future-oriented thinking in the face of pandemics.
The overarching goal of neurobiology is to understand how complex behaviors are generated by the nervous system. The behavior of each species, and the brain that controls it, is shaped by the historical and current state of the environment that they inhabit. This fact is juxtaposed with the reductionist approach of neuroscience that isolates animals from their natural environment. Understanding how brains evolved to orchestrate the myriads of natural behaviors an animal performs in response to its environment requires an integrative approach to neuroscience that considers ecology, ethology, and evolution. Current technological developments are leading us to an inflection point at which studying brain functions in the wild is now possible. Ecological studies on how the environment affects behavior of animals (i.e., hibernation, foraging, food hoarding, and nest building) have framed a plurality of questions to be answered mechanistically, and yet, only few studies have addressed the relationship between the environment and the brain's anatomy and physiology. Neuroscience needs new animal models that allow us to tackle such questions in the wild. Here, we propose a new animal model for wild neuroscience, the agouti ( Dasyprocta spp.), a large wild rodent playing a critical seasonal role in the maintenance of the central and south American rainforest ecosystems. We focus on how a rodent model, like the agouti, will allow for the investigation of large‐scale brain dynamics during seasonal behaviors of ecological importance: scatter‐hoarding and retrieval. We describe agouti evolution, ecology, and physiology as well as neuro‐anatomical and neurophysiological studies, which have set the foundation for future neuroscience in natura. We suggest agoutis have the potential to be a groundbreaking model for wild neuroscience.
Plain English Summary
Is impatience holding back digital innovation in Italian firms? This study investigates how entrepreneurs’ impatience and risk attitudes affect their investment in digital technologies. Using data from a survey of Italian firms and an innovative approach that leverages earthquakes as a natural experiment, we discovered that impatience significantly reduces the likelihood of investing in digital technologies, even when accounting for risk preferences. This suggests that entrepreneurs’ tendency towards impatience can be a major barrier to adopting essential digital innovations. The findings underscore the importance of developing policies that promote long-term investment strategies and help entrepreneurs build patience. Such policies could facilitate greater adoption of digital technologies and boost business competitiveness.
Objetivo: investigar a existência da relação entre o grau de maquiavelismo e o nível de paciência na perspectiva das preferências temporais das finanças comportamentais, considerando as dimensões culturais e informações sociodemográficas. Referencial Teórico: Apresenta os conceitos e as teorias mais importantes que fundamentam a pesquisa, relacionando as características de personalidade — maquiavelismo e impaciência — fatores sociodemográficos, ambiente cultural de profissionais e preferência temporal nas tomadas de decisão em investimentos. Método: Metodologia de abordagem empírico-teórica, do tipo descritiva, com dados coletados por meio de questionário em todas as regiões brasileiras, totalizando 377 respostas válidas de profissionais que atuam com informações financeiras, disponibilizado de forma remota, em cursos pós-graduação na área de gestão em todos os estados da federação, como também divulgado em redes sociais, durante o ano de 2021/2022. A técnica principal de análise de resultados foi a regressão linear multivariada, por meio de reamostragem, para testar as hipóteses. Resultados e Discussão: Os resultados indicam que os sujeitos com menor grau de maquiavelismo demonstraram ser mais impacientes no curto e no longo prazo, tanto no nível individual quanto ao considerar as regiões brasileiras nas quais ele reside. A localização geográfica não interfere nesse processo. Pessoas do sexo feminino são mais impacientes em curto prazo. Implicações da Pesquisa: Esses resultados ampliam os estudos da área das finanças comportamentais para a construção de um arcabouço teórico mais robusto, ao dialogar com características de personalidade e com o ambiente cultural de profissionais imbricados na tomada de decisão de investimentos. Originalidade/Valor: Os resultados desta pesquisa contribuem nos aspectos teórico e prático — ampliam o debate ainda pouco explorado sobre estudos entre maquiavelismo e impaciência e traz uma abordagem comportamental e empírica, com estudantes de pós-gradução da área de negócios, permitindo a reflexão sobre como o indíviduo é influenciado pelo ambiente cultural e por aspectos emocionais que envolvem o nível de paciência nas atividades laborais.
In real life, decision-makers often intentionally ignore “high probability, large loss” risks, leading to irreparable consequences. For example, in business, companies may prioritize short-term profits over long-term goals, disregarding accumulated risks. Similarly, in personal life, individuals often deliberately ignore and sacrifice long-term health for immediate pleasures, such as prolonged sitting, inactivity, or late-night gaming, despite knowing the risks.
To explore the underlying scientific issues of this phenomenon, this project introduces the novel concept of “myopic risk ignorance.” Specifically, this concept refers to the difficulty decision-makers encounter in accurately perceiving or assessing the interdependencies among repeated similar decisions due to myopic evaluations and cognitive limitations. As a result, driven by the pursuit of immediate gains in individual decisions, decision-makers often sacrifice globally optimal goals and gradually ignore long-term risks. The phenomenon of myopic risk ignorance involves two consecutive choices in each round: first, whether to “execute” or “not execute” a certain risky behavior, and second, if they choose to execute, they need to decide the degree of execution. For the risky behavior, the decision to “execute” contains obvious “immediate small gains,” but it is also accompanied by “dynamic losses” that are often deliberately ignored. The objective probability and extent of these losses gradually increase with the degree of execution and the number of execution rounds. Choosing “not to execute” requires resisting immediate gratification, accurately assessing potential losses, and pursuing sustainable long-term goals.
Myopic risk ignorance is a specific attitude within the context of sequential decision making, where individuals or organizations make a series of decisions over time to achieve optimal overall goals. Despite its prevalence, existing research primarily focuses on one-shot decisions, neglecting genuine behavioral patterns in sequential decision making. This limitation has impeded exploration of myopic risk ignorance. To address this gap, the project aims to uncover patterns and key characteristics of myopic risk ignorance within the framework of sequential decision making. It also seeks to develop a research paradigm to measure attitudes and explore the underlying mechanisms within decision processes and goals. This project is divided into three main studies: phenomenon revelation (Study 1), attitude measurement (Study 2), and mechanism exploration (Study 3).
Study 1 aims to construct a scenario questionnaire to measure individuals’ myopic risk ignorance in daily decision making, verifying the phenomenon’s universality and robustness. Study 2, based on the characteristics of myopic risk ignorance - where individuals continuously choose to execute risky behavior or deepen the degree of execution, gaining “small gains,” but at the same time, they are accompanied by “dynamic losses with gradually increasing probability and magnitude” - will design a card-turning task as an abstract simulation of real-life decision making. Additionally, this study will use both the scenario questionnaire and the task paradigm to assess myopic risk ignorance attitudes, testing the consistency of these measurements. Study 3 intends to explore the underlying mechanisms by examining the relevance of decision processes and the multiplicity of decision goals in sequential decision making, laying the groundwork for future behavioral interventions.
In summary, this project offers several contributions. It scientifically defines myopic risk ignorance, opening new theoretical perspectives for related research and expanding the fields of risky and intertemporal decision making. By analyzing decision characteristics over rounds, it provides a foundation for future research and new insights into behavioral decision theories. Moreover, exploring the mechanisms of myopic risk ignorance from both process and goal perspectives establishes a basis for prediction and intervention systems in related social phenomena. The research findings have practical applications, supporting the development of intervention strategies and sequential decision-making support systems that help individuals and organizations identify, assess, and mitigate long-term risks, ultimately enhancing long-term welfare.
Leonard Lessius was one of the most accomplished philosophers of the Salamanca School whose great contribution to the study of law lies in the use of economic analysis to study legal institutes. The book, which is the subject to the present review, gives account of his scientific achievements. Among many other questions tackled by Lessius, the review discusses the evolution of the pacta sunt servanda principle, the morality and legality of interest, price mechanism, competition as well as the economic aspects of the salvation of one's soul. Attention is also paid to influence of Lessius on contemporary and later authors and timelessness of some of his theories.
The article reports two studies applying time-discounting principles to career-related issues. The first study on 40 participants examined the influence of time delay on decisions between options for paying a student union fee or receiving a student scholarship. The predicted positive–negative asymmetry was obtained, with greater time discounting for positive than negative outcomes. The second study compared 13 expert career counselors with 22 similar-age novices in terms of their degree of discounting for their own job preferences and for those of an average graduate. No differences emerged between the novices and experts in relation to their own choices, but experts presented a more realistic assessment of the average graduate decisions than did the novices. The results are discussed in terms of the importance of time perspective in career choice, framing effects, the implicit time constructs in occupational information, and the difficulty of applying career expertise to one's own job choices.
Perhaps the simplest and the most basic qualitative law of probability is the conjunction rule: The probability of a conjunction,
P(A&B), cannot exceed the probabilities of its constituents,
P(A) and
P(B), because the extension (or the possibility set) of the conjunction is included in the extension of its constituents. Judgments under uncertainty, however, are often mediated by intuitive heuristics that are not bound by the conjunction rule. A conjunction can be more representative that one of its constituents, and instances of a specific category can be easier to imagine or to retrieve than instances of a more inclusive category. The representativeness and availability heuristics therefore can make a conjunction appear more probable than one of its constituents. This phenomenon is demonstrated in a variety of contexts, including estimation of word frequency, personality judgment, medical prognosis, decision under risk, suspicion of criminal acts, and political forecasting. Systematic violations of the conjunction rule are observed in judgments of lay people and of experts in both between- and within-Ss comparisons. Alternative interpretations of the conjunction fallacy are discussed, and attempts to combat it are explored. (48 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Asked 2 groups of vocational school 11th graders (N = 45) to choose among various betting alternatives representing different degrees of risk taking. In one group, the betting results were expected immediately; in the other, a week later. When results were expected immediately, Ss tended to choose alternatives with low probability but higher potential gain in situations where they could only gain, and alternatives with high probability but lower potential loss, when they could only lose. No difference was found between the groups in choices among alternatives involving both gain and loss. Results are explained in terms of the effect of temporal distance on the relative saliences of the factors of value and probability. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Time preferences tend to be quite consistent within 1 decision domain but unrelated between different domains, such as health and money. One explanation may be that the young, healthy participants in previous studies were familiar with financial decisions but unfamiliar with health decisions. In Experiment 1, patient participants with 1 of 2 diagnoses (migraine headaches or inflammatory bowel disease) were given time preference scenarios concerning their own disorder (familiar), the other group's disorder (unfamiliar), and money. Monetary time preferences were not more closely related to time preferences from the familiar health scenario than to those from the unfamiliar scenario. Experiment 2 replicated the results with healthy participants and ruled out 1 alternative account of Experiment 1. These results have implications for self-control problems and public policy. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Four male White Carneaux pigeons were offered a choice between 2- and 6-sec access to food reward, with the larger reward delivered 4 sec later than the smaller. As the delay between the availability of the choice and the availability of the smaller reward increased from 2 to 28 sec, every S reversed its preference from the smaller to the larger, more delayed reward. These interacting effects of relative delay and amount of reward on choice have implications for behavioral models of self-control. (16 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Presents a new theory of subjective probability according to which different descriptions of the same event can give rise to different judgments. The experimental evidence confirms the major predictions of the theory. First, judged probability increases by unpacking the focal hypothesis and decreases by unpacking the alternative hypothesis. Second, judged probabilities are complementary in the binary case and subadditive in the general case, contrary to both classical and revisionist models of belief. Third, subadditivity is more pronounced for probability judgments than for frequency judgments and is enhanced by compatible evidence. The theory provides a unified treatment of a wide range of empirical findings. It is extended to ordinal judgments and to the assessment of upper and lower probabilities. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Meaningful decision problems often involve intertemporal choices. In the case of uncertainty, the resolution of uncertainty is an essential feature of decision alternatives. Early resolution of uncertainty might offer planning benefits, late resolution might be preferred for decision makers who want to hope as long as possible for a good consequence. The focus of this paper is entirely descriptive. We present an experimental study investigating subjects' resolution preference. We find that some subjects prefer early and some prefer late resolution of uncertainty. We also find that this preference systematically depends on the source of utility and on the probabilities involved.
We present a consumption-based model that explains a wide variety of dynamic asset pricing phenomena, including the procyclical variation of stock prices, the long-horizon predictability of excess stock returns, and the countercyclical variation of stock market volatility. The model captures much of the history of stock prices from consumption data. It explains the short- and long-run equity premium puzzles despite a low and constant risk-free rate. The results are essentially the same whether we model stocks as a claim to the consumption stream or as a claim to volatile dividends poorly correlated with consumption. The model is driven by an independently and identically distributed consumption growth process and adds a slow-moving external habit to the standard power utility function. These features generate slow countercyclical variation in risk premia. The model posits a fundamentally novel description of risk premia: Investors fear stocks primarily because they do poorly in recessions unrelated to the risks of long-run average consumption growth.
Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper presents simulations of the savings and asset allocation choices of households with hyperbolic preferences. The behavior of the hyperbolic households is compared to the behavior of exponential households. The hyperbolic households borrow much more frequently in the revolving credit market. The hyperbolic households exhibit greater consumption income comovement and experience a greater drop in consumption around retirement. The hyperbolic simulations match observed consumption and balance sheet data much better than the exponential simulations.
Eight alternative methods of eliciting preferences between money and a consumption good are identified: two of these are standard
willingness-to-accept and willingness-to-pay measures. These methods differ with respect to the reference point used and the
dimension in which responses are expressed. The loss aversion hypothesis of Tversky and Kahneman's theory of reference-dependent
preferences predicts systematic differences between the preferences elicited by these methods. These predictions are tested
by eliciting individuals' preferences for two private consumption goods; the experimental design is incentive-compatible and
controls for income and substitution effects. The theory's predictions are broadly confirmed.
1. THE PURPOSE of this paper is to analyze critically the nature of the solutions that have been offered to the problem of how much a nation should optimally save. Since savings in this connection is the only alternative to consumption, this is equivalent to the problem of how much a nation should optimally consume. An optimal consumption program is one that makes a certain stipulated functional in utilities /(U(c(t))) as high as possible, subject to certain restrictions on the class of admissible utility and production functions. U here is an indicator of instantaneous utility and C(t) is consumption at point t. Two approaches have been adopted in finding this optimal program: (a) to define the functions C(t) on a finite time interval (0 < t < T) which corresponds to a finite planning horizon. This makes the domain of the functions closed and bounded. Together with the assumption of continuity of the various functions, this is in principle enough to solve the problem of the optimal program over the relevant time horizon. But the solution may be crucially dependent on the length of time period T and the valuation attached to the terminal stock of capital.2 The latter is not a meaningful concept unless we try to take into account what happens beyond T. This reveals the problem essentially as extending indefinitely over t. To tackle this problem of indefinite extension in time an alternative formulation is presented: (b) the functions C(t) are now defined
Studies of animal and human behavior suggest that discount functions are approximately hyperbolic (Ainslie, Picoeconomics, 1992). Hyperbolic models explain a wide range of empirical anomalies including (1) missing precautionary savings effects, (2) incongruence between the elasticity of intertemporal substitution and the inverse of the coefficient of relative risk aversion, (3) consumption discontinuities at retirement, (4) variation in patience over the life cycle, (5) consumer self-reports of `undersaving', (6) disproportionate retirement accumulation in illiquid assets, (7) asset-specific marginal propensities to consume, and (8) declining national savings rates in developed countries. Hyperbolic models also provide a new framework for analyzing the welfare gains that come from pro-saving policies like social security and tax-deferred retirement accounts.
This book is about differences in intellectual capacity among people and groups and what those differences mean for America's future.(preface) The major purpose of this book] is to reveal the dramatic transformation that is currently in process in American society---a process that has created a new kind of class structure led by a "cognitive elite," itself a result of concentration and self-selection in those social pools well endowed with cognitive abilities. Herrnstein and Murray explore] the ways that low intelligence, independent of social, economic, or ethnic background, lies at the root of many of our social problems. The authors also demonstrate the truth of another taboo fact: that intelligence levels differ among ethnic groups. (PsycINFO Database Record (c) 2012 APA, all rights reserved)(jacket)
The independence of delay-discounting rate and monetary reward size was tested by offering subjects (N = 621) a series of choices between immediate rewards and larger, delayed rewards. In contrast to previous studies, in which hypothetical rewards have typically been employed, subjects in the present study were entered into a lottery in which they had a chance of actually receiving one of their choices. The delayed rewards were grouped into small (35), medium (65), and large amounts (85). Using a novel parameter estimation procedure, we estimated discounting rates for all three reward sizes for each subject on the basis of his/her pattern of choices. The data indicated that the discounting rate is a decreasing function of the size of the delayed reward (p < .0001), whether hyperbolic or exponential discounting functions are assumed. In addition, a reliable gender difference was found (p = .005), with males discounting at higher rates than females, on average.
Satisfaction N~ith n desired outcome depends both on it.sposition li.e., the actual value of the outcomel and on it.svelocityli.e.,the change in the slue) .In u yrre.stionncrire .study,sve in- vesti,~>ated _/iuuorsthat in/lnetrceNre rel- ative x~eikhtinyof position crud relocitr In satisfawtion and found that the rela- tive weight of relocity loomed larker x~hen the outcome was lu) framed in terms of change Iratl:er than in terms of overall position),Ibl related to corr.snnt- mutory (rather than instrumental) be- haviors, or Ic)internally(rather than ex- ternally) controlled . Tlre findings .srrk- kest that the relative importance of position and velocity in satisfactionvar- ies,dependink on the condition and na- ture of the outcome .
The triarchic theory of human intelligence provides a broader basis for understanding intelligence than do many, if not most theories of intelligence. The theory is called “triarchic” because it consists of three parts. The first part relates intelligence to the internal world of the individual, specifying the mental mechanisms that lead to more or less intelligent behaviour. This part of the theory specifies three kinds of mental processes that are instrumental in learning how to do things, planning what things to do and how to do them, and in actually doing the things. The second part of the theory specifies at what point in a persons’ experience with tasks or situations intelligence is most critically involved in handling of those tasks or situation In particular, this part of the theory emphasises the roles of dealing with novelty and of automatising mental processing in intelligence. The third part of the theory relates intelligence to the external world of the individual, specifying three kinds of macroprocesses — adaptation, selection and shaping — that characterise intelligent behaviour in the everyday world. This part of the theory thus emphasises the role of environmental context in determining what constitutes intelligent behaviour in a given milieu.
Participants chose between reinforcement schedules differing in delay of reinforcement (interval between a choice response and onset of a video game) and/or amount of reinforcement (duration of access to the game). Experiment 1 showed that immediate reinforcement was preferred to delayed reinforcement with amount of reinforcement held constant, and a large reinforcer was preferred to a small reinforcer when both were obtainable immediately. Imposing a delay before the large reinforcer produced a preference for the immediate, small reinforcer in 40% of participants. This suggested a limited degree of “impulsivity.” In Experiment 2, unequal delays were extended by equal intervals, the amounts being kept equal. Preference for the shorter delay decreased, an effect that presumably makes possible the “preference reversal” phenomenon in studies of self-control. Overall, the results demonstrate that video game playing can produce useful, systematic data when used as a positive reinforcer for choice behavior in humans.
Whereas choices among individual outcomes at different points in time generally show a positive time preference, choices between sequences of outcomes usually show a negative time preference, that is, a preference for improvement. The present studies explored how this preference for improving sequences is moderated by expectations about how sequences are usually experienced. Subjects in three experiments evaluated four types of health sequences with multiple sequence lengths. The length of the sequence and the particular health attribute described influenced both preferences and expectations such that preferences tracked expectations about how the sequences would realistically occur. Several mechanisms by which expectations could influence preferences are discussed. Copyright © 2000 John Wiley & Sons, Ltd.
A basic stationarity axiom of economic theory assumes stable preference between two deferred goods separated by a fixed time To test this assumption, we offered subjects choices between delayed rewards, while manipulating the delays to those rewards Preferences typically reversed with changes in delay, as predicted by hyperbolic discounting models of impulsiveness Of 36 subjects, 34 reversed preference from a larger, later reward to a smaller, earlier reward as the delays to both rewards decreased We conclude that the stationarity axiom is not appropriate in models of human choice
This chapter highlights the question whether second-best saving is greater or smaller than first-best saving when given future saving is non-optimal from the standpoint of the present generation. The chapter presents the postulation that all generations expect each succeeding generation to choose the saving ratio that is second-best in its eyes. This somewhat game-theoretic model leads to the concept of an equilibrium sequence of saving-income ratios having the property that no generation acting alone can do better and all generations act so as to warrant the expectations of the future saving ratios. The chapter presents a comparison of this equilibrium and the first-best optimum. The concept and calculation of the second-best optimum is of interest even if that analysis does not explain actual national saving because society as a whole has no notion of such an optimum.
The axiomatic models of intertemporal choice assume that an individual's rate of time discount is constant. Yet a great deal of anecdotal and hypothetical evidence suggests that the discount rate is instead hyperbolic. Likewise, animal studies have also supported the hyperbolic discount rate. Very little empirical evidence exists using human subjects making salient choices. Using experimental economic methodology, support is found for the stationarity component of the discount rate assumption but not for the linearity component.
I consider a general model of decisionmaking where anticipatory feelings enter theagent's utility function in addition to physical outcomes, and allowforinteractionsbetween these twopayo# components. I use an equilibrium concept, personal equilibrium,that combines best response to other selves" strategies with rational expectationsin the formation of feelings. A decisionmaker with feelings can exhibit informationalpreferences due to the insecurity she has to live with if she does not...
This paper presents a problem which I believe has not heretofore been analysed2 and provides a theory to explain, under different circumstances, three related phenomena: (1) spendthriftiness; (2) the deliberate regimenting of one’s future economic behaviour— even at a cost; and (3) thrift. The senses in which we deal with these topics can probably not be very well understood, however, until after the paper has been read; but a few sentences at this point may shed some light on what we are up to.
In this study, children, young adults, and older adults chose between immediate and delayed hypothetical monetary rewards. The amount of the delayed reward was held constant while its delay was varied. All thr-ee age groups showed delay discounting; that is, the amount of an immediate reward judged to be of equal value to the delayed reward decreased as a function of delay. The rate of discounting was highest for children and lowest for older adults, predicting a life-span developmental trend toward increased self control. Discounting of delayed rewards by all three age groups was well described by a single function with age sensitive parameters (all R(2)s > .94). Thus, evert though there are quantitative age differences in delay discounting, the existence of an age-invariant form of discount function suggests that the process of choosing between rewards of different amounts and delays is qualitatively similar across the life span.
In "Losing Control," the authors provide a single reference source with comprehensive information on general patterns of self-regulation failure across contexts, research findings on specific self-control disorders, and commentary on the clinical and social aspects of self-regulation failure. Self-control is discussed in relation to what the "self" is, and the cognitive, motivational, and emotional factors that impinge on one's ability to control one's "self." (PsycINFO Database Record (c) 2012 APA, all rights reserved)
This paper uses an original sample of 146 business managers to examine the rationality of choices with respect to deferred lotteries. Using a new empirical methodology, it explicitly estimates implicit rates of time preference with respect to these deferred gambles. The estimated discount rate decreases with the time horizon of the gamble, which is consistent with violations observed in discounted utility contexts. Cigarette smokers exhibit lower estimated discount rates in this context, which is contrary to many popular hypotheses about the economic causes of smoking behavior. (PsycINFO Database Record (c) 2012 APA, all rights reserved)