Anomalies in Intertemporal Choice: Evidence and an Interpretation
@article{Loewenstein1992AnomaliesII,
title={Anomalies in Intertemporal Choice: Evidence and an Interpretation},
author={George Loewenstein and Drazen Prelec},
journal={Quarterly Journal of Economics},
year={1992},
volume={107},
pages={573-597}
}Research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility (EU) anomalies—behaviors that violate the expected utility axioms. The relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility (DU) anomalies. We enumerate a set of DU anomalies analogous to the EU anomalies and propose a model that accounts for the anomalies, as well as other…
2,198 Citations
Anomalies in Intertemporal Choice?
- Economics
- 2007
This paper argues that observations of non-stationary choice behavior need not necessarily imply specific properties of the individual's discount function. As we show, the observed "anomalies" in…
Time Discounting and Time Preference: A Critical Review
- Economics
- 2002
This paper discusses the discounted utility (DU) model: its historical development, underlying assumptions, and "anomalies" - the empirical regularities that are inconsistent with its theoretical…
The Structure of Intertemporal Preferences under Uncertain Lifetime
- Economics
- 2001
Does experimental evidence of the common difference effect imply that intertemporal preferences are time inconsistent? Do these features of choice suggest inherent characteristics of preferences, or…
Intertemporal choice under timing risk: An experimental approach
- Economics
- 2007
This paper investigates how individuals evaluate delayed outcomes with risky realization times. Under the discounted expected utility (DEU) model, such evaluations depend only on intertemporal…
Habits and the Anomalies in Intertemporal Choice
- Economics
- 1997
This paper analyzes a model of discounted utility under habit formation. Habit formation means that utility in each period is determined by the difference between the received outcome and the…
Intertemporal Choice
- Economics
- 2018
Intertemporal tradeoffs play a key role in many personal decisions and policy questions. We describe models of intertemporal choice, identify empirical regularities in choice, and pose new questions…
An analysis of intertemporal inconsistency through the hyperbolic factor
- EconomicsQuality & Quantity
- 2022
Intertemporal choices play a fundamental role in the lives of individuals, and the Discounted Utility model is the essential framework for describing decision makers’ attitudes in front of…
Beyond Time Discounting
- Economics
- 1997
The intertemporal tradeoffs made by most persons appear inconsistent when viewed through the lens of the standard time-discounting model. At different times and in different decision contexts, the…
References
SHOWING 1-10 OF 56 REFERENCES
Anticipation and the Valuation of Delayed Consumption
- Economics
- 1987
This paper presents a model of intertemporal choice that incorporates "savoring" and "dread"-i.e., utility from anticipat ion of delayed consumption. The model explains why an individual with…
Stationary Ordinal Utility and Impatience
- Economics
- 1960
This paper investigates Bohm-Bawerk's idea of a preference for advancing the timing of future satisfactions from a somewhat different point of view. It is shown that simple postulates about the…
Intertemporal Preferences and Labor Supply
- Economics
- 1988
In this paper, the authors examine whether nonseparable preference structures ar e important in characterizing life-cycle labor supply. Using longitud inal data on prime-age males from the Panel…
Frames of mind in intertemporal choice
- Economics
- 1988
Recent research has demonstrated that choices between gambles are systematically influenced by the way they are expressed. Kahneman and Tversky's Prospect Theory Kahneman, D., A. Tversky. 1979.…
Myopia and Inconsistency in Dynamic Utility Maximization
- Economics
- 1955
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…
Consumer Discount Rate and the Horizon: New Evidence
- Economics, BusinessJournal of Political Economy
- 1971
An attempt has been made in this paper to provide new evidence concerning the length of the horizon, which is an important feature in the permanent income hypothesis. The results strongly support…
Discount rates inferred from decisions: an experimental study
- Economics
- 1987
Two hundred and four students of economics and finance participated in an intertemporal choice experiment which manipulated three dimensions in a 4 \times 4 \times 4 factorial design: scenario…
Value functions for infinite-period planning
- Economics
- 1986
Cost-benefit and risk analysis studies that model tradeoffs between the present and the distant future by means of present value discounting have been criticized for according the future, and thus…
Prospect theory: analysis of decision under risk
- Economics
- 1979
Analysis of decision making under risk has been dominated by expected utility theory, which generally accounts for people's actions. Presents a critique of expected utility theory as a descriptive…