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… 

Figures from this paper

Anomalies in Intertemporal Choice?

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

Risk and preference reversals in intertemporal choice

Time Discounting and Time Preference: A Critical Review

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Explaining investor preference for cash dividends

...