Modelling intertemporal choices: An anomaly approach

Many of our daily decisions involve evaluations between present and future benefits and costs. It is often the case that we have to make judgments and choices, both common and important, the outcomes or consequences of which may occur at some future moment in time. Decisions of this type, in which t...

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Bibliographic Details
Published in:Acta psychologica 1996-09, Vol.93 (1), p.5-22
Main Author: Roelofsma, Peter H.M.P.
Format: Article
Language:English
Subjects:
Approaches
Decision making
Intertemporal choice
Psychology
Risk taking
Time perspective
Time perspectives
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Summary:Many of our daily decisions involve evaluations between present and future benefits and costs. It is often the case that we have to make judgments and choices, both common and important, the outcomes or consequences of which may occur at some future moment in time. Decisions of this type, in which the realization of outcomes may lie in the imminent or remote future, have been referred to as intertemporal choices. Intertemporal choices have been frequently analyzed by the concept of time discounting and the corresponding discounting utility (DU) model. The validity of this conventional economic model for describing intertemporal decisions has recently been examined by several researchers. They questioned the conventional model by stating that an exponential declining discount function cannot explain the empirical finding of time-inconsistent preferences as a function of elapsed time. Such inconsistent preferences are incompatible with the standard discounting model. The paper reviews other phenomena that cannot be accounted for by the conventional time-discounting model. Several alternative approaches to DU will be discussed and their descriptive validity assessed with respect to these anomalies.
ISSN:0001-6918
1873-6297
DOI:10.1016/0001-6918(96)00023-6