Side Effects in Time Discounting Procedures: Fixed Alternatives Become the Reference Point (original) (raw)
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This paper investigates "asymmetries" between non-monetary gains and losses in intertemporal choice. We considered gains and losses of spare/working time with respect to a reference duration defined in a working contract. Specifically, we elicited a behavioral model of intertemporal choice that accounts for a gain/lossdependent discounting function and a reference-dependent utility. Additionally, we did not impose preference for the present (positive discounting) and allowed for both decreasing and increasing impatience. While our results are standard regarding the discount of money (our baseline treatment), our subjects heavily discounted gains of time. More patience was observed for losses of time and a sizable portion of subjects even exhibited negative discounting, i.e. they preferred to expedite losses of time. Our econometric estimations also reveal a much larger heterogeneity of behavior in terms of both utility and discounting for gains and losses of spare time as compared to money.
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Journal of Experimental Psychology: Learning, Memory, and Cognition, 2013
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.
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Psychological Review, 2010
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.
Social Science Research Network, 2016
This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual's willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements.
Erkenntnis, 2006
To what extent do we care about future events? The standard approach to this issue in economic analysis is a bifactorial model, in which the value of a future good is assumed to be equal to the product of two factors. One of these factors is a time-independent evaluation of the good in question, i.e. the value of obtaining it immediately. The other factor represents the subject's ''pure time preferences''. It is a function of the length of the delay, and is the same for all types of goods. The most common type of time preference function can be written (1)r) t , where r is a discount rate and t the duration of the delay. This is the discounted utility model, proposed by Paul Samuelson in 1937, that still dominates in economic analysis. Time and Decision is an impressive collection of 18 essays that summarize and analyze most of the available empirical evidence on temporal aspects of human preferences. The book provides a wealth of evidence that the discounted utility model does not adequately represent human behaviour. To begin with, consider a person who prefers 1 apple today to 2 apples tomorrow, but yet (today) prefers 2 apples in 51 days to 1 apple in 50 days. Although this is a plausible preference pattern, it is obviously incompatible with the discounted utility model. It can however be accounted for in a bifactorial model if the time preference function has a declining discount rate. But this is not the only type of deviation from the discounted utility model that has been demonstrated. The experimental evidence also shows that we tend to discount gains more than losses, and small amounts more than large amounts. Discount rates differ between different goods (such as money and health). For some-but only some-types of goods, improving sequences of outcomes are preferred to declining sequences. These are all patterns that cannot be handled in the bifactorial model with its object-independent time preferences. Given