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Mental Zooming as Variable Asset Integration in Inter-temporal Choice

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  • Holden, Stein T.

    (Centre for Land Tenure Studies, Norwegian University of Life Sciences)

  • Sommervoll, Dag Einar

    (Centre for Land Tenure Studies, Norwegian University of Life Sciences)

  • Tilahun, Mesfin

    (Centre for Land Tenure Studies, Norwegian University of Life Sciences)

Abstract

Our time preferences deviate systematically from that of Homo economicus. They seem to be driven by a form of mental zooming, where higher and more distant payouts induce a more holistic perspective in contrast to smaller and near future payouts. We model zooming as variable asset integration and ask whether this can explain the observed variation in discount rates in experiments. It can. Equally important, the zooming for both time and magnitude is similar across two countries (Ethiopia and Malawi), and within a country (Ethiopia). An intriguing empirical regularity is that the dimensionless degree of zooming in time is roughly twice the zooming degree in magnitude. We offer no explanation for this asymmetry between time and magnitude.

Suggested Citation

  • Holden, Stein T. & Sommervoll, Dag Einar & Tilahun, Mesfin, 2020. "Mental Zooming as Variable Asset Integration in Inter-temporal Choice," CLTS Working Papers 7/20, Norwegian University of Life Sciences, Centre for Land Tenure Studies.
    • Handle: RePEc:hhs:nlsclt:2020_007
    Note: The paper is part of the NORGLOBAL2 project "Youth Business Groups for Sustainable Development: Lessons from the Ethiopian Model", and it aims at providing a better basis for understanding investment decisions by youth group members.
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    References listed on IDEAS

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    Keywords

    time discounting; magnitude effects; asset integration; zooming theory.;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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