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Towards an Incentive Salience Model of Intertemporal Choice

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  • Leonhard K. Lades
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    Abstract

    This theoretical paper presents an incentive salience model of intertemporal choice. The model is a variation of the quasi-hyperbolic discounting model. Based on the distinction between 'wanting' and 'liking', the paper presents one possible explanation of impulsive choices of smaller sooner rewards instead of larger later ones. These impulsive choices are induced by cues that trigger strong motivational 'wanting' to obtain smaller sooner rewards, but do not necessarily influence the degree to which the rewards are 'liked'. Cue-triggered 'wanting' can occur when an individual is in a specific need deprivation state, perceives a cue previously associated with an immediately obtainable reward, knows that the cued reward can reduce the current deprivation state, and lacks self-control. By integrating cue-triggered 'wanting' into an intertemporal choice model, the incentive salience model allows to predict which rewards elicit impulsive choices of smaller sooner rewards, thus offering an explanation for the domain effect.

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    Bibliographic Info

    Paper provided by Philipps University Marburg, Department of Geography in its series Papers on Economics and Evolution with number 2011-18.

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    Length: 24 pages
    Date of creation: 15 Dec 2011
    Date of revision:
    Handle: RePEc:esi:evopap:2011-18

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    Keywords: Intertemporal Consumer Choice; Impulsivity; 'Wanting' versus 'Liking';

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    References

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    1. 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.
    2. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
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    7. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
    8. Ulrich Witt, 2010. "Economic Behavior - Evolutionary vs. Behavioral Perspectives," Papers on Economics and Evolution 2010-17, Max Planck Institute of Economics, Evolutionary Economics Group.
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    10. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
    11. Stefano DellaVigna & Ulrike Malmendier, 2006. "Paying Not to Go to the Gym," American Economic Review, American Economic Association, vol. 96(3), pages 694-719, June.
    12. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
    13. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
    14. Bram Van den Bergh & Siegfried Dewitte & Luk Warlop, 2008. "Bikinis Instigate Generalized Impatience in Intertemporal Choice," Journal of Consumer Research, University of Chicago Press, vol. 35(1), pages 85-97, 01.
    15. Raeva, Daniela & Mittone, Luigi & Schwarzbach, Jens, 2010. "Regret now, take it now: On the role of experienced regret on intertemporal choice," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 634-642, August.
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    Cited by:
    1. Leonhard K. Lades, 2012. "Impulsive Consumption and Reflexive Thought: Nudging Ethical Consumer Behavior," Papers on Economics and Evolution 2012-03, Max Planck Institute of Economics, Evolutionary Economics Group.

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