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The Psychology of Intertemporal Discounting: Why are Distant Events Valued Differently from Proximal Ones?

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Author Info

  • Dilip Soman

    ()

  • George Ainslie
  • Shane Frederick
  • Xiuping Li
  • John Lynch
  • Page Moreau
  • Andrew Mitchell
  • Daniel Read
  • Alan Sawyer
  • Yaacov Trope
  • Klaus Wertenbroch
  • Gal Zauberman
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    Abstract

    Research in intertemporal choice has been done in a variety of contexts, yet there is a remarkable consensus that future outcomes are discounted (or undervalued) relative to immediate outcomes. In this paper, we (a) review some of the key findings in the literature, (b) critically examine and articulate implicit assumptions, (c) distinguish between intertemporal effects arising due to time preference versus those due to changes in utility as a function of time, and (d) identify issues and questions that we believe serve as avenues for future research. Copyright Springer Science + Business Media, Inc. 2005

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    File URL: http://hdl.handle.net/10.1007/s11002-005-5897-x
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    Bibliographic Info

    Article provided by Springer in its journal Marketing Letters.

    Volume (Year): 16 (2005)
    Issue (Month): 3 (December)
    Pages: 347-360

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    Handle: RePEc:kap:mktlet:v:16:y:2005:i:3:p:347-360

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    Web page: http://www.springerlink.com/link.asp?id=100312

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    References

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    1. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
    2. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
    3. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
    4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    5. Read, Daniel & van Leeuwen, Barbara, 1998. "Predicting Hunger: The Effects of Appetite and Delay on Choice, , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 76(2), pages 189-205, November.
    6. Read, Daniel, 2001. " Is Time-Discounting Hyperbolic or Subadditive?," Journal of Risk and Uncertainty, Springer, vol. 23(1), pages 5-32, July.
    7. Hoch, Stephen J & Loewenstein, George F, 1991. " Time-Inconsistent Preferences and Consumer Self-Control," Journal of Consumer Research, University of Chicago Press, vol. 17(4), pages 492-507, March.
    8. Charles T. Clotfelter & Ronald G. Ehrenberg & Malcolm Getz & John J. Siegfried, 1991. "References," NBER Chapters, in: Economic Challenges in Higher Education, pages 393-410 National Bureau of Economic Research, Inc.
    9. George F. Loewenstein, 1988. "Frames of Mind in Intertemporal Choice," Management Science, INFORMS, vol. 34(2), pages 200-214, February.
    10. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
    11. Schelling, Thomas C, 1984. "Self-Command in Practice, in Policy, and in a Theory of Rational Choice," American Economic Review, American Economic Association, vol. 74(2), pages 1-11, May.
    12. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-84, September.
    13. Samuel H. Preston & Michael R. Haines, 1991. "References," NBER Chapters, in: Fatal Years: Child Mortality in Late Nineteenth-Century America, pages 237-258 National Bureau of Economic Research, Inc.
    14. Soman, Dilip, 2004. "The effect of time delay on multi-attribute choice," Journal of Economic Psychology, Elsevier, vol. 25(2), pages 153-175, April.
    15. Zauberman, Gal, 2003. " The Intertemporal Dynamics of Consumer Lock-In," Journal of Consumer Research, University of Chicago Press, vol. 30(3), pages 405-19, December.
    16. Klaus Wertenbroch, 1998. "Consumption Self-Control by Rationing Purchase Quantities of Virtue and Vice," Marketing Science, INFORMS, vol. 17(4), pages 317-337.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why are distant events valued differently from proximal ones?
      by Miguel in Simoleon Sense on 2011-08-18 16:12:26
    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:
    1. Andreas Oehler & Christina Werner, 2008. "Saving for Retirement—A Case for Financial Education in Germany and UK? An Economic Perspective," Journal of Consumer Policy, Springer, vol. 31(3), pages 253-283, September.
    2. Tim Benning & Els Breugelmans & Benedict Dellaert, 2012. "Consumers’ evaluation of allocation policies for scarce health care services: Vested interest activation trumps spatial and temporal distance," Marketing Letters, Springer, vol. 23(3), pages 531-543, September.
    3. de La Bruslerie, Hubert, 2009. "Term structure of psychological interest rates: A behavioural test," Economics Papers from University Paris Dauphine 123456789/3033, Paris Dauphine University.
    4. Takahashi, Taiki & Hadzibeganovic, Tarik & Cannas, Sergio & Makino, Takaki & Fukui, Hiroki & Kitayama, Shinobu, 2009. "Cultural neuroeconomics of intertemporal choice," MPRA Paper 16814, University Library of Munich, Germany.
    5. Rogers, Todd & Bazerman, Max H., 2008. "Future lock-in: Future implementation increases selection of 'should' choices," Organizational Behavior and Human Decision Processes, Elsevier, vol. 106(1), pages 1-20, May.

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