This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Choosing Monetary Sequences: Theory and Experimental Evidence

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Paola Manzini ()
Marco Mariotti ()
Luigi Mittone ()

Additional information is available for the following registered author(s):

Abstract

In this paper we formulate and investigate experimentally a model of how individuals choose between sequences of monetary outcomes spread out in time. The theoretical model assumes that a decision-maker uses, in a sequential way, two criteria to screen options. Each criterion only permits a decision between some pairs of options, while the other options are incomparable according to that criterion When the first criterion is not decisive, the decision maker resorts to the second criterion to select an alternative. This type of decision procedures has encountered the favour of several psychologists, though it is quite under-explored in the economics domain. We find that: 1) traditional economic models based on discounting alone cannot explain a significant (almost 30%) proportion of the data no matter how much variability in discount functions is allowed; 2) our model, despite considering only a specific (exponential) form of discounting, can explain the data much better solely thanks to the use of the secondary criterion; 3) our model explains certain specific patterns in the choices of the 'irrational' people: we can reject the hypothesis that anomalous behaviour is due simply to random 'mistakes' around the basic predictions of discounting theories: the deviations are not random and there are clear systematic patterns of association between 'irrational' choices.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-ceel.economia.unitn.it/papers/papero06_01.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Computable and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia in its series CEEL Working Papers with number 0601.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:trn:utwpce:0601

Contact details of provider:
Postal: Via Inama 5, 38100 Trento
Phone: +39-461-882201
Fax: +39-461-882222
Web page: http://www-ceel.economia.unitn.it
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Marco Tecilla).

Related research
Keywords: Time preference; Time sequences; Negative discounting;

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rubinstein, A., 2000. "Is it "Economics and Psychology"?: the Case of Hyperbolic Discounting," Papers 2000-21, Tel Aviv.
    Other versions:
  2. Lowenstein, George & Prelec, Drazen, 1991. "Negative Time Preference," American Economic Review, American Economic Association, vol. 81(2), pages 347-52, May.
  3. Paola Manzini & Marco Mariotti, 2004. "Rationalizing Boundedly Rational Choice," Microeconomics 0407005, EconWPA, revised 21 Jul 2005. [Downloadable!]
  4. Read, Daniel, 2001. " Is Time-Discounting Hyperbolic or Subadditive?," Journal of Risk and Uncertainty, Springer, vol. 23(1), pages 5-32, July. [Downloadable!] (restricted)
  5. Chapman, Gretchen B., 1996. "Expectations and Preferences for Sequences of Health and Money," Organizational Behavior and Human Decision Processes, Elsevier, vol. 67(1), pages 59-75, July. [Downloadable!] (restricted)
  6. Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 67-84, January. [Downloadable!] (restricted)
  7. Ariel Rubinstein, 2003. ""Economics and Psychology"? The Case of Hyperbolic Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1207-1216, November. [Downloadable!] (restricted)
  8. Rubinstein, Ariel, 2001. "A theorist's view of experiments," European Economic Review, Elsevier, vol. 45(4-6), pages 615-628, May. [Downloadable!] (restricted)
  9. 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.
  10. Gary Gigliotti & Barry Sopher, 1996. "Violations of Present-value Maximization in Income Choice," Departmental Working Papers 199624, Rutgers University, Department of Economics.
  11. Guyse, Jeffery L. & Keller, L. Robin & Eppel, Thomas, 2002. "Valuing Environmental Outcomes: Preferences for Constant or Improving Sequences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 87(2), pages 253-277, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paola Manzini & Marco Mariotti, 2006. "Two-Stage Boundedly Rational Choice Procedures: Theory and Experimental Evidence," IZA Discussion Papers 2341, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Paola Manzini & Marco Mariotti, 2007. "Choice Over Time," IZA Discussion Papers 2993, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
    • Paola Manzini & Marco Mariotti, 2007. "Choice over Time," Working Papers 605, Queen Mary, University of London, Department of Economics. [Downloadable!]
Statistics
Access and download statistics

Did you know? IDEAS also indexes books.

This page was last updated on 2009-11-20.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.