daniel read - Academia.edu (original) (raw)
Papers by daniel read
SSRN Electronic Journal, 2019
This paper investigates strategic rationality in a fictional world, specifically that of Edgar Al... more This paper investigates strategic rationality in a fictional world, specifically that of Edgar Allan Poe’s “The Purloined Letter.” This tale has been rightly celebrated for its explicit analysis of strategic reasoning in which players attempt to understand one another’s reasoning, taking into account how they are taking into account one another’s reasoning. In this paper I consider how the actors are often wrong in their explicit analysis, and consider the strategic actions they take rather than those they claim to take. Using the language of game theory I describe five games (and maybe six) that are played out in the tale. These include games of signalling, screening, negotiation, and a unique game called the “pincer”. I consider how literary sources like “The Purloined Letter” can provide insights into psychology, and the applicability of game theory in the “real world”.
Psychology & Marketing, 2018
Human adults often show a preference for scarce over abundant goods. In this paper, we investigat... more Human adults often show a preference for scarce over abundant goods. In this paper, we investigate whether this preference was shared by 4‐ and 6‐year‐old children as well as chimpanzees, humans’ nearest primate relative. Neither chimpanzees nor 4‐year‐olds displayed a scarcity preference, but 6‐year‐olds did, especially in the presence of competitors. We conclude that scarcity preference is a human‐unique preference that develops as humans increase their cognitive skills and social experiences with peers and competitors. We explore different potential psychological explanations for scarcity preference and conclude scarcity preference is based on children's fear of missing out an opportunity, especially when dealing with uncertainty or goods of unknown value in the presence of competitors. Furthermore, the results are in line with studies showing that supply‐based scarcity increases the desirability of hedonic goods, suggesting that even as early as 6 years of age humans may use...
Journal of Risk and Uncertainty
Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcome... more Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcomes they must be designated. It has been shown that a gamble is judged to be more attractive when its zero outcome is designated as “losing 0”ratherthan“winning0” rather than “winning 0”ratherthan“winning0,” an instance of what we refer to as the mutable-zero effect. Drawing on norm theory, we argue that “losing 0”or“paying0” or “paying 0”or“paying0” evokes counterfactual losses, with which the zero outcome compares favorably (a good zero), and thus acquires positive value, whereas “winning 0”or“receiving0” or “receiving 0”or“receiving0” evokes counterfactual gains, with which the zero outcome compares unfavorably (a bad zero), and thus acquires negative value. Moreover, we propose that the acquired value of zero outcomes operates just as the intrinsic value of nonzero outcomes in the course of decision making. We derive testable implications from prospect theory for mutable-zero effects in risky choice, and from the double-entry mental accounting model for mutable-zero e...
Journal of Experimental Psychology: Applied
Is the inferred preference from a choice to donate stronger when the choice was made under a mand... more Is the inferred preference from a choice to donate stronger when the choice was made under a mandated rather than the automatic default (nudged choice) legislative system? The answer to this is particularly important because families can, and do, veto the choices of their deceased relatives. In three studies, we asked American and European participants from countries that have either a default opt-in or default opt-out system to take on the role of a third party to judge the likelihood that an individual's "true wish" was to actually donate their organs, given that they were registered to donate on the organ donation register. In each study, participants were randomly assigned to one of the organ donation legislative systems (default opt-in, default opt-out, mandated choice or mandatory). Overall, regardless of which country participants came from, they perceived the donor's underlying preference to donate as stronger under the default optin and mandated choice systems as compared to the default opt-out and mandatory donor systems. We discuss the practical issues that result from using default systems in the domain of organ donation and propose potential ways to ameliorate the uncertainty around inferences of underlying preference from a nudged choice.
Management Science
Many decision makers seek to optimize choices between uncertain options such as strategies, emplo... more Many decision makers seek to optimize choices between uncertain options such as strategies, employees, or products. When performance targets must be met, attending to observed past performance is not enough to optimize choices-option uncertainty must also be considered. For example, for stretch targets that exceed observed performance, more uncertain options are often better bets. A significant determinant of option uncertainty is sample size: for a given option, the smaller the sample of information we have about it, the greater the uncertainty. In two studies, choices were made between pairs of uncertain options with the goal of exceeding a specified performance target. Information about the options differed in the size of the sample drawn from them, sample size, and the observed performance of those samples, the proportion of successes or "hits" in the sample. We found people to be sensitive to sample size-based uncertainty only when differences in observed performance were negligible. We conclude that in the presence of performance targets, people largely fail to capitalize on the value advantages of small samples in the presence of stretch targets.
Management Science
This paper proposes a novel account of impatience: People pay more attention to the opportunity c... more This paper proposes a novel account of impatience: People pay more attention to the opportunity costs of choosing larger, later rewards than to the opportunity costs of choosing smaller, sooner ones. Eight studies show that when the opportunity costs of choosing smaller, sooner rewards are subtly highlighted, people become more patient, whereas when the opportunity costs of choosing larger, later rewards are highlighted this has no effect. This pattern is robust to variations in the choice task, to the participant population, and to whether the choices are incentivized or hypothetical. We argue that people are naturally aware of the opportunity costs of delayed rewards but pay less attention to those associated with smaller, sooner ones. We conclude by discussing implications for theory and policy.
Journal of Experimental Psychology: General
This article may not exactly replicate the authoritative document published in the APA journal. I... more This article may not exactly replicate the authoritative document published in the APA journal. It is not the copy of record. A note on versions: The version presented here may differ from the published version or, version of record, if you wish to cite this item you are advised to consult the publisher's version. Please see the 'permanent WRAP URL' above for details on accessing the published version and note that access may require a subscription.
Management Science, 2017
Unimodal intertemporal decisions involve comparing options of the same type (e.g., apples now ver... more Unimodal intertemporal decisions involve comparing options of the same type (e.g., apples now versus apples later), and cross-modal decisions involve comparing options of different types (e.g., a car now versus a vacation later). As we show, existing models of intertemporal choice do not allow time preference to depend on whether the comparisons to be made are unimodal or cross-modal. We test this restriction in an experiment using the delayed compensation method, a new extension of the standard method of eliciting intertemporal preferences that allows for assessment of time preference for nonmonetary and discrete outcomes, as well as for both cross-modal and unimodal comparisons. Participants were much more averse to delay for unimodal than cross-modal decisions. We provide two potential explanations for this effect: one drawing on multiattribute choice, the other drawing on construal-level theory.
Decision, 2014
Warwick Business School We examine violations of dominance in intertemporal choice. Adding an imm... more Warwick Business School We examine violations of dominance in intertemporal choice. Adding an immediate receipt to a delayed payment, or adding a delayed receipt to an immediate one, makes the prospect objectively better, and yet decreases the likelihood it will be chosen (better is worse). Conversely, adding an immediate payment to a delayed receipt, or adding a delayed payment to an immediate one, makes the prospect objectively worse, and yet increases the likelihood it will be chosen (worse is better). Results are consistent across between-participant and within-participant comparisons and across hypothetical and real choices. Prior expectations about the 4 violations of dominance draw on Loewenstein and Prelec's (1993) sequences model and the implied preference for improvement over deterioration. Detailed results suggest that there is a role for loss aversion and debt aversion in people's reaction to individual losses.
Psychological Review, 2010
It is commonly assumed that people make intertemporal choices by "discounting" the value of delay... more It is commonly assumed that people make intertemporal choices by "discounting" the value of delayed outcomes, assigning discounted values independently to all options, and comparing the discounted values. We identify a class of anomalies to this assumption of alternative-based discounting, which collectively shows that options are not treated independently but rather comparatively: The time difference, or interval, between the options sometimes counts more and sometimes counts less if it is taken as a whole than if it is divided into shorter subintervals (superadditivity and subadditivity, respectively), and whether the interval counts more or less depends on the money difference, or compensation, involved (inseparability). We develop a model that replaces alternative-based discounting with attribute-based tradeoffs. In our model, people make intertemporal choices by weighing how much more they will receive or pay if they wait longer against how much longer the wait will be, or, conversely, how much less they will receive or pay if they do not wait longer against how much shorter the wait will be. This model, called the tradeoff model, accommodates, in a psychologically plausible way, all anomalies that the discounting approach can and cannot address.
Marketing Theory, 2007
The contributors have asserted their moral rights. All rights reserved. No part of this publicati... more The contributors have asserted their moral rights. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without the prior permission in writing of the publisher, nor be circulated in any form of binding or cover other than that in which it is published.
Management Science, 2006
A ccording to most models of intertemporal choice, an agent's discount rate is a function of how ... more A ccording to most models of intertemporal choice, an agent's discount rate is a function of how far the outcomes are removed from the present, and nothing else. This view has been challenged by recent studies, which show that discount rates tend to be higher the closer the outcomes are to one another (subadditive discounting) and that this can give rise to intransitive intertemporal choice. We develop and test a generalized model of intertemporal choice, the Discounting By Intervals (DBI) model, according to which the discount rate is a function of both how far outcomes are removed from the present and how far the outcomes are removed from one another. The model addresses past challenges to other models, most of which it includes as special cases, as well as the new challenges presented in this paper: Our studies show that when the interval between outcomes is very short, discount rate tends to increase with interval length (superadditive discounting). In the discussion we place our model and evidence in a broader theoretical context.
Journal of Experimental Psychology: Learning, Memory, and Cognition, 2012
We extend the recently proposed tradeoff model of intertemporal choice (Scholten & Read, 2010) fr... more We extend the recently proposed tradeoff model of intertemporal choice (Scholten & Read, 2010) from choices between pairs of single outcomes to pairwise choices involving two-outcome sequences. The core of our proposal is that choices between sequences are made by weighing accumulated outcomes against outcome-adjusted delays. Thus extended, the tradeoff model offers a unified account of recently discovered anomalies in pairwise choices involving two-outcome sequences, including (a) the hiddenzero effect, in which explicit reference to the zero outcomes of the options increases patience, (b) the front-end amount effect, in which the addition of a front-end amount to both options decreases patience, and (c) the mere token effect, in which the addition of an early outcome to both options increases patience. Not only does the extended tradeoff model accommodate these anomalies, it also correctly predicts (d) violations of independence, (e) a reversal of the front-end amount effect, (f) the effect of relocating the front-end amount to the back end of both options, and (g) a dependence of the "mere" token effect on the magnitude of the token. In quantitative analyses, the extended tradeoff model offers an accurate account of the data.
Journal of Experimental Psychology: Learning, Memory, and Cognition, 2013
A robust anomaly in intertemporal choice is the delay-speedup asymmetry: Receipts are discounted ... more A robust anomaly in intertemporal choice is the delay-speedup asymmetry: Receipts are discounted more, and payments are discounted less, when delayed than when expedited over the same interval. We developed 2 versions of the tradeoff model (Scholten & Read, 2010) to address such situations, in which an outcome is expected at a given time but then its timing is changed. The outcome framing model generalizes the approach taken by the hyperbolic discounting model (Loewenstein & Prelec, 1992): Not obtaining a positive outcome when expected is a worse than expected state, to which people are over-responsive, or hypersensitive, and not incurring a negative outcome when expected is a better than expected state, to which people are under-responsive, or hyposensitive. The time framing model takes a new approach: Delaying a positive outcome or speeding up a negative one involves a loss of time to which people are hypersensitive, and speeding up a positive outcome or delaying a negative one involves a gain of time to which people are hyposensitive. We compare the models on their quantitative predictions of indifference data from matching and preference data from choice. The time framing model systematically outperforms the outcome framing model.
Journal of Economic Psychology, 2006
Thomas Schelling observed that when people use self-command to prevent their future selves from a... more Thomas Schelling observed that when people use self-command to prevent their future selves from acting waywardly, they eVectively divide themselves into two selves with conXicting desires for the same point. In the morning, for example, a dieter may not want dessert at dinnertime but change his mind when at table. This raises the question of which self is authentic or rational. Or, if we are asked to help that person to achieve his goals, which side should we take? This article considers several proposed answers to this question, and argues that they do not provide a satisfactory answer to the question of how we should or how we do take sides. It is suggested that taking sides in intrapersonal conXict is more of a judgment about the "rightness" of an action, than a consideration of what it is that the person "really" wants.
Organizational Behavior and Human Decision Processes, 2004
Several theories of intertemporal choice predict systematic age differences in the rate at which ... more Several theories of intertemporal choice predict systematic age differences in the rate at which people discount the future. Different theories, however, predict different patterns: one predicts that discounting will decrease over the lifespan, so that young people will discount more than the middle aged or elderly, another suggests it will increase over the lifespan, and yet another suggests that the
Organizational Behavior and Human Decision …, 1998
Preferences often fluctuate as a result of transient changes in hunger and other visceral states.... more Preferences often fluctuate as a result of transient changes in hunger and other visceral states. When current decisions have delayed consequences, the preferences that should be relevant are those that will prevail when the consequences occur. However, consistent with the notion of an intrapersonal empathy gap (Loewenstein, 1996) we find that an individual's current state of appetite has a significant effect on choices that apply to the future. Participants in our study made advance choices between healthy and unhealthy snacks (i.e., fruit and junk food) that they would receive in 1 week when they were either hungry (late in the afternoon) or satisfied (immediately after lunch). In 1 week, at the appointed time, they made an immediate choice, an opportunity to change their advance choice. Our main predictions were strongly confirmed. First, advance choices were influenced by current hunger as well as future hunger: hungry participants chose more unhealthy snacks than did satisfied ones. Second, participants were dynamically inconsistent: they chose far more unhealthy snacks for immediate choice than for advance choice. An additional hypothesis related to gender differences was also confirmed.
Journal of Behavioral …, 2003
We report three studies demonstrating the "lure of choice": people prefer options that permit fur... more We report three studies demonstrating the "lure of choice": people prefer options that permit further choices over those that do not, even when those choices cannot improve the ultimate outcome. In Studies 1 and 2, participants chose between two options: one solitary item, and a pair of items between which they would then make a further choice. Participants were lured by choice: any given item was more likely to be chosen when it was initially part of a choice pair than when it was offered on its own. We also demonstrate the lure of choice in a four door version of the Monty Hall problem, in which participants could either stick with their original choice or switch to one of two unopened doors. Participants were more likely to switch if they could first 'choose to choose' between the two unopened doors (without immediately specifying which) than if they had to choose one door straightaway. We conclude by discussing theoretical accounts for the lure of choice, and argue that it is due to a choice heuristic that is very reliable in the natural world, but much less so in a world created by marketers.
People prefer to receive good outcomes immediately rather than wait, and they must be compensated... more People prefer to receive good outcomes immediately rather than wait, and they must be compensated for waiting. But what influences their decision about how much compensation is required for a given wait? To give a partial answer to this question, we develop the DRIFT model, a heuristic description of how framing influences intertemporal choice. We describe 4 experiments showing the implications of this model. In the experiments, we vary how the difference between a smaller sooner outcome and a larger later outcome is framed-either as total interest earned, as an interest rate, or as total amount earned (the conventional frame in studies of intertemporal choice)-and whether the larger later outcome is described as resulting from the investment of the smaller sooner one. These alternate frames have several effects. First, the investment language increases patience. Second, the explicit provision of the (otherwise implicit) experimental interest rate sharply reduces the magnitude effect. Correspondingly, we find that interest frames increase patience when the rewards are small, but they decrease patience when they are large. Third, the interest-rate frame induces somewhat greater discounting for longer time periods and, thus, reverses the common finding of "hyperbolic" discounting. Thus, many of the "stylized facts" implied by studies involving choices between a smaller sooner and a larger later amount are eliminated or reverse under alternate outcome frames.
The full-text may be used and/or reproduced, and given to third parties in any format or medium, ... more The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.
SSRN Electronic Journal, 2019
This paper investigates strategic rationality in a fictional world, specifically that of Edgar Al... more This paper investigates strategic rationality in a fictional world, specifically that of Edgar Allan Poe’s “The Purloined Letter.” This tale has been rightly celebrated for its explicit analysis of strategic reasoning in which players attempt to understand one another’s reasoning, taking into account how they are taking into account one another’s reasoning. In this paper I consider how the actors are often wrong in their explicit analysis, and consider the strategic actions they take rather than those they claim to take. Using the language of game theory I describe five games (and maybe six) that are played out in the tale. These include games of signalling, screening, negotiation, and a unique game called the “pincer”. I consider how literary sources like “The Purloined Letter” can provide insights into psychology, and the applicability of game theory in the “real world”.
Psychology & Marketing, 2018
Human adults often show a preference for scarce over abundant goods. In this paper, we investigat... more Human adults often show a preference for scarce over abundant goods. In this paper, we investigate whether this preference was shared by 4‐ and 6‐year‐old children as well as chimpanzees, humans’ nearest primate relative. Neither chimpanzees nor 4‐year‐olds displayed a scarcity preference, but 6‐year‐olds did, especially in the presence of competitors. We conclude that scarcity preference is a human‐unique preference that develops as humans increase their cognitive skills and social experiences with peers and competitors. We explore different potential psychological explanations for scarcity preference and conclude scarcity preference is based on children's fear of missing out an opportunity, especially when dealing with uncertainty or goods of unknown value in the presence of competitors. Furthermore, the results are in line with studies showing that supply‐based scarcity increases the desirability of hedonic goods, suggesting that even as early as 6 years of age humans may use...
Journal of Risk and Uncertainty
Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcome... more Zero outcomes are inconsequential in most models of choice. However, when disclosing zero outcomes they must be designated. It has been shown that a gamble is judged to be more attractive when its zero outcome is designated as “losing 0”ratherthan“winning0” rather than “winning 0”ratherthan“winning0,” an instance of what we refer to as the mutable-zero effect. Drawing on norm theory, we argue that “losing 0”or“paying0” or “paying 0”or“paying0” evokes counterfactual losses, with which the zero outcome compares favorably (a good zero), and thus acquires positive value, whereas “winning 0”or“receiving0” or “receiving 0”or“receiving0” evokes counterfactual gains, with which the zero outcome compares unfavorably (a bad zero), and thus acquires negative value. Moreover, we propose that the acquired value of zero outcomes operates just as the intrinsic value of nonzero outcomes in the course of decision making. We derive testable implications from prospect theory for mutable-zero effects in risky choice, and from the double-entry mental accounting model for mutable-zero e...
Journal of Experimental Psychology: Applied
Is the inferred preference from a choice to donate stronger when the choice was made under a mand... more Is the inferred preference from a choice to donate stronger when the choice was made under a mandated rather than the automatic default (nudged choice) legislative system? The answer to this is particularly important because families can, and do, veto the choices of their deceased relatives. In three studies, we asked American and European participants from countries that have either a default opt-in or default opt-out system to take on the role of a third party to judge the likelihood that an individual's "true wish" was to actually donate their organs, given that they were registered to donate on the organ donation register. In each study, participants were randomly assigned to one of the organ donation legislative systems (default opt-in, default opt-out, mandated choice or mandatory). Overall, regardless of which country participants came from, they perceived the donor's underlying preference to donate as stronger under the default optin and mandated choice systems as compared to the default opt-out and mandatory donor systems. We discuss the practical issues that result from using default systems in the domain of organ donation and propose potential ways to ameliorate the uncertainty around inferences of underlying preference from a nudged choice.
Management Science
Many decision makers seek to optimize choices between uncertain options such as strategies, emplo... more Many decision makers seek to optimize choices between uncertain options such as strategies, employees, or products. When performance targets must be met, attending to observed past performance is not enough to optimize choices-option uncertainty must also be considered. For example, for stretch targets that exceed observed performance, more uncertain options are often better bets. A significant determinant of option uncertainty is sample size: for a given option, the smaller the sample of information we have about it, the greater the uncertainty. In two studies, choices were made between pairs of uncertain options with the goal of exceeding a specified performance target. Information about the options differed in the size of the sample drawn from them, sample size, and the observed performance of those samples, the proportion of successes or "hits" in the sample. We found people to be sensitive to sample size-based uncertainty only when differences in observed performance were negligible. We conclude that in the presence of performance targets, people largely fail to capitalize on the value advantages of small samples in the presence of stretch targets.
Management Science
This paper proposes a novel account of impatience: People pay more attention to the opportunity c... more This paper proposes a novel account of impatience: People pay more attention to the opportunity costs of choosing larger, later rewards than to the opportunity costs of choosing smaller, sooner ones. Eight studies show that when the opportunity costs of choosing smaller, sooner rewards are subtly highlighted, people become more patient, whereas when the opportunity costs of choosing larger, later rewards are highlighted this has no effect. This pattern is robust to variations in the choice task, to the participant population, and to whether the choices are incentivized or hypothetical. We argue that people are naturally aware of the opportunity costs of delayed rewards but pay less attention to those associated with smaller, sooner ones. We conclude by discussing implications for theory and policy.
Journal of Experimental Psychology: General
This article may not exactly replicate the authoritative document published in the APA journal. I... more This article may not exactly replicate the authoritative document published in the APA journal. It is not the copy of record. A note on versions: The version presented here may differ from the published version or, version of record, if you wish to cite this item you are advised to consult the publisher's version. Please see the 'permanent WRAP URL' above for details on accessing the published version and note that access may require a subscription.
Management Science, 2017
Unimodal intertemporal decisions involve comparing options of the same type (e.g., apples now ver... more Unimodal intertemporal decisions involve comparing options of the same type (e.g., apples now versus apples later), and cross-modal decisions involve comparing options of different types (e.g., a car now versus a vacation later). As we show, existing models of intertemporal choice do not allow time preference to depend on whether the comparisons to be made are unimodal or cross-modal. We test this restriction in an experiment using the delayed compensation method, a new extension of the standard method of eliciting intertemporal preferences that allows for assessment of time preference for nonmonetary and discrete outcomes, as well as for both cross-modal and unimodal comparisons. Participants were much more averse to delay for unimodal than cross-modal decisions. We provide two potential explanations for this effect: one drawing on multiattribute choice, the other drawing on construal-level theory.
Decision, 2014
Warwick Business School We examine violations of dominance in intertemporal choice. Adding an imm... more Warwick Business School We examine violations of dominance in intertemporal choice. Adding an immediate receipt to a delayed payment, or adding a delayed receipt to an immediate one, makes the prospect objectively better, and yet decreases the likelihood it will be chosen (better is worse). Conversely, adding an immediate payment to a delayed receipt, or adding a delayed payment to an immediate one, makes the prospect objectively worse, and yet increases the likelihood it will be chosen (worse is better). Results are consistent across between-participant and within-participant comparisons and across hypothetical and real choices. Prior expectations about the 4 violations of dominance draw on Loewenstein and Prelec's (1993) sequences model and the implied preference for improvement over deterioration. Detailed results suggest that there is a role for loss aversion and debt aversion in people's reaction to individual losses.
Psychological Review, 2010
It is commonly assumed that people make intertemporal choices by "discounting" the value of delay... more It is commonly assumed that people make intertemporal choices by "discounting" the value of delayed outcomes, assigning discounted values independently to all options, and comparing the discounted values. We identify a class of anomalies to this assumption of alternative-based discounting, which collectively shows that options are not treated independently but rather comparatively: The time difference, or interval, between the options sometimes counts more and sometimes counts less if it is taken as a whole than if it is divided into shorter subintervals (superadditivity and subadditivity, respectively), and whether the interval counts more or less depends on the money difference, or compensation, involved (inseparability). We develop a model that replaces alternative-based discounting with attribute-based tradeoffs. In our model, people make intertemporal choices by weighing how much more they will receive or pay if they wait longer against how much longer the wait will be, or, conversely, how much less they will receive or pay if they do not wait longer against how much shorter the wait will be. This model, called the tradeoff model, accommodates, in a psychologically plausible way, all anomalies that the discounting approach can and cannot address.
Marketing Theory, 2007
The contributors have asserted their moral rights. All rights reserved. No part of this publicati... more The contributors have asserted their moral rights. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without the prior permission in writing of the publisher, nor be circulated in any form of binding or cover other than that in which it is published.
Management Science, 2006
A ccording to most models of intertemporal choice, an agent's discount rate is a function of how ... more A ccording to most models of intertemporal choice, an agent's discount rate is a function of how far the outcomes are removed from the present, and nothing else. This view has been challenged by recent studies, which show that discount rates tend to be higher the closer the outcomes are to one another (subadditive discounting) and that this can give rise to intransitive intertemporal choice. We develop and test a generalized model of intertemporal choice, the Discounting By Intervals (DBI) model, according to which the discount rate is a function of both how far outcomes are removed from the present and how far the outcomes are removed from one another. The model addresses past challenges to other models, most of which it includes as special cases, as well as the new challenges presented in this paper: Our studies show that when the interval between outcomes is very short, discount rate tends to increase with interval length (superadditive discounting). In the discussion we place our model and evidence in a broader theoretical context.
Journal of Experimental Psychology: Learning, Memory, and Cognition, 2012
We extend the recently proposed tradeoff model of intertemporal choice (Scholten & Read, 2010) fr... more We extend the recently proposed tradeoff model of intertemporal choice (Scholten & Read, 2010) from choices between pairs of single outcomes to pairwise choices involving two-outcome sequences. The core of our proposal is that choices between sequences are made by weighing accumulated outcomes against outcome-adjusted delays. Thus extended, the tradeoff model offers a unified account of recently discovered anomalies in pairwise choices involving two-outcome sequences, including (a) the hiddenzero effect, in which explicit reference to the zero outcomes of the options increases patience, (b) the front-end amount effect, in which the addition of a front-end amount to both options decreases patience, and (c) the mere token effect, in which the addition of an early outcome to both options increases patience. Not only does the extended tradeoff model accommodate these anomalies, it also correctly predicts (d) violations of independence, (e) a reversal of the front-end amount effect, (f) the effect of relocating the front-end amount to the back end of both options, and (g) a dependence of the "mere" token effect on the magnitude of the token. In quantitative analyses, the extended tradeoff model offers an accurate account of the data.
Journal of Experimental Psychology: Learning, Memory, and Cognition, 2013
A robust anomaly in intertemporal choice is the delay-speedup asymmetry: Receipts are discounted ... more A robust anomaly in intertemporal choice is the delay-speedup asymmetry: Receipts are discounted more, and payments are discounted less, when delayed than when expedited over the same interval. We developed 2 versions of the tradeoff model (Scholten & Read, 2010) to address such situations, in which an outcome is expected at a given time but then its timing is changed. The outcome framing model generalizes the approach taken by the hyperbolic discounting model (Loewenstein & Prelec, 1992): Not obtaining a positive outcome when expected is a worse than expected state, to which people are over-responsive, or hypersensitive, and not incurring a negative outcome when expected is a better than expected state, to which people are under-responsive, or hyposensitive. The time framing model takes a new approach: Delaying a positive outcome or speeding up a negative one involves a loss of time to which people are hypersensitive, and speeding up a positive outcome or delaying a negative one involves a gain of time to which people are hyposensitive. We compare the models on their quantitative predictions of indifference data from matching and preference data from choice. The time framing model systematically outperforms the outcome framing model.
Journal of Economic Psychology, 2006
Thomas Schelling observed that when people use self-command to prevent their future selves from a... more Thomas Schelling observed that when people use self-command to prevent their future selves from acting waywardly, they eVectively divide themselves into two selves with conXicting desires for the same point. In the morning, for example, a dieter may not want dessert at dinnertime but change his mind when at table. This raises the question of which self is authentic or rational. Or, if we are asked to help that person to achieve his goals, which side should we take? This article considers several proposed answers to this question, and argues that they do not provide a satisfactory answer to the question of how we should or how we do take sides. It is suggested that taking sides in intrapersonal conXict is more of a judgment about the "rightness" of an action, than a consideration of what it is that the person "really" wants.
Organizational Behavior and Human Decision Processes, 2004
Several theories of intertemporal choice predict systematic age differences in the rate at which ... more Several theories of intertemporal choice predict systematic age differences in the rate at which people discount the future. Different theories, however, predict different patterns: one predicts that discounting will decrease over the lifespan, so that young people will discount more than the middle aged or elderly, another suggests it will increase over the lifespan, and yet another suggests that the
Organizational Behavior and Human Decision …, 1998
Preferences often fluctuate as a result of transient changes in hunger and other visceral states.... more Preferences often fluctuate as a result of transient changes in hunger and other visceral states. When current decisions have delayed consequences, the preferences that should be relevant are those that will prevail when the consequences occur. However, consistent with the notion of an intrapersonal empathy gap (Loewenstein, 1996) we find that an individual's current state of appetite has a significant effect on choices that apply to the future. Participants in our study made advance choices between healthy and unhealthy snacks (i.e., fruit and junk food) that they would receive in 1 week when they were either hungry (late in the afternoon) or satisfied (immediately after lunch). In 1 week, at the appointed time, they made an immediate choice, an opportunity to change their advance choice. Our main predictions were strongly confirmed. First, advance choices were influenced by current hunger as well as future hunger: hungry participants chose more unhealthy snacks than did satisfied ones. Second, participants were dynamically inconsistent: they chose far more unhealthy snacks for immediate choice than for advance choice. An additional hypothesis related to gender differences was also confirmed.
Journal of Behavioral …, 2003
We report three studies demonstrating the "lure of choice": people prefer options that permit fur... more We report three studies demonstrating the "lure of choice": people prefer options that permit further choices over those that do not, even when those choices cannot improve the ultimate outcome. In Studies 1 and 2, participants chose between two options: one solitary item, and a pair of items between which they would then make a further choice. Participants were lured by choice: any given item was more likely to be chosen when it was initially part of a choice pair than when it was offered on its own. We also demonstrate the lure of choice in a four door version of the Monty Hall problem, in which participants could either stick with their original choice or switch to one of two unopened doors. Participants were more likely to switch if they could first 'choose to choose' between the two unopened doors (without immediately specifying which) than if they had to choose one door straightaway. We conclude by discussing theoretical accounts for the lure of choice, and argue that it is due to a choice heuristic that is very reliable in the natural world, but much less so in a world created by marketers.
People prefer to receive good outcomes immediately rather than wait, and they must be compensated... more People prefer to receive good outcomes immediately rather than wait, and they must be compensated for waiting. But what influences their decision about how much compensation is required for a given wait? To give a partial answer to this question, we develop the DRIFT model, a heuristic description of how framing influences intertemporal choice. We describe 4 experiments showing the implications of this model. In the experiments, we vary how the difference between a smaller sooner outcome and a larger later outcome is framed-either as total interest earned, as an interest rate, or as total amount earned (the conventional frame in studies of intertemporal choice)-and whether the larger later outcome is described as resulting from the investment of the smaller sooner one. These alternate frames have several effects. First, the investment language increases patience. Second, the explicit provision of the (otherwise implicit) experimental interest rate sharply reduces the magnitude effect. Correspondingly, we find that interest frames increase patience when the rewards are small, but they decrease patience when they are large. Third, the interest-rate frame induces somewhat greater discounting for longer time periods and, thus, reverses the common finding of "hyperbolic" discounting. Thus, many of the "stylized facts" implied by studies involving choices between a smaller sooner and a larger later amount are eliminated or reverse under alternate outcome frames.
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