IDEAS home Printed from https://ideas.repec.org/p/hrv/faseco/30367415.html
   My bibliography  Save this paper

Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does

Author

Listed:
  • Marzilli Ericson, K. M.
  • White, J. M.
  • Laibson, David I.
  • Cohen, J. D.

Abstract

Heuristic models have been proposed for many domains involving choice. We conducted an out-of-sample, cross-validated comparison of heuristic models of intertemporal choice (which can account for many of the known intertemporal choice anomalies) and discounting models. Heuristic models outperformed traditional utility-discounting models, including models of exponential and hyperbolic discounting. The best-performing models predicted choices by using a weighted average of absolute differences and relative percentage differences of the attributes of the goods in a choice set. We concluded that heuristic models explain time-money trade-off choices in experiments better than do utility-discounting models.

Suggested Citation

  • Marzilli Ericson, K. M. & White, J. M. & Laibson, David I. & Cohen, J. D., 2015. "Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does," Scholarly Articles 30367415, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:30367415
    as

    Download full text from publisher

    File URL: http://dash.harvard.edu/bitstream/handle/1/30367415/34371965.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Drazen Prelec, 2004. "Decreasing Impatience: A Criterion for Non‐stationary Time Preference and “Hyperbolic” Discounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 511-532, October.
    2. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2012. "Salience Theory of Choice Under Risk," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1243-1285.
    3. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 573-597.
    4. Jane E. J. Ebert & Drazen Prelec, 2007. "The Fragility of Time: Time-Insensitivity and Valuation of the Near and Far Future," Management Science, INFORMS, vol. 53(9), pages 1423-1438, September.
    5. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    6. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    7. Daniel Read & Shane Frederick & Burcu Orsel & Juwaria Rahman, 2005. "Four Score and Seven Years from Now: The Date/Delay Effect in Temporal Discounting," Management Science, INFORMS, vol. 51(9), pages 1326-1335, September.
    8. Read, Daniel, 2001. "Is Time-Discounting Hyperbolic or Subadditive?," Journal of Risk and Uncertainty, Springer, vol. 23(1), pages 5-32, July.
    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. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 155-161.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:cup:judgdm:v:16:y:2021:i:6:p:1324-1369 is not listed on IDEAS
    2. Sudeep Bhatia & Graham Loomes & Daniel Read, 2021. "Establishing the laws of preferential choice behavior," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(6), pages 1324-1369, November.
    3. Anke Gerbe & Kirsten I.M. Rohde, 2010. "Risk and Preference Reversals in Intertemporal Choice," Post-Print hal-00911832, HAL.
    4. Gerber, Anke & Rohde, Kirsten I.M., 2010. "Risk and preference reversals in intertemporal choice," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 654-668, December.
    5. Scholten, Marc & Read, Daniel, 2006. "Beyond discounting: the tradeoff model of intertemporal choice," LSE Research Online Documents on Economics 22710, London School of Economics and Political Science, LSE Library.
    6. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten I. & Rutström, E. Elisabet, 2014. "Discounting behavior: A reconsideration," European Economic Review, Elsevier, vol. 71(C), pages 15-33.
    7. de La Bruslerie, Hubert & Pratlong, Florent, 2012. "La valeur psychologique du temps : une synthèse de la littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(3), pages 361-400, Septembre.
    8. Shotaro Shiba & Kazumi Shimizu, 2020. "Does time inconsistency differ between gain and loss? An intra-personal comparison using a non-parametric elicitation method," Theory and Decision, Springer, vol. 88(3), pages 431-452, April.
    9. Ali al-Nowaihi & Sanjit Dhami, 2018. "Foundations for Intertemporal Choice," CESifo Working Paper Series 6913, CESifo.
    10. Han, Ruokang & Takahashi, Taiki, 2012. "Psychophysics of time perception and valuation in temporal discounting of gain and loss," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6568-6576.
    11. al-Nowaihi, Ali & Dhami, Sanjit, 2009. "A value function that explains the magnitude and sign effects," Economics Letters, Elsevier, vol. 105(3), pages 224-229, December.
    12. Paola Manzini & Marco Mariotti, 2007. "Choice over Time," Working Papers 605, Queen Mary University of London, School of Economics and Finance.
    13. Ali al-Nowaihi & Sanjit Dhami, 2021. "Preferences over Time and under Uncertainty: Theoretical Foundations," CESifo Working Paper Series 9215, CESifo.
    14. Sezer Ülkü & Claudiu V. Dimofte & Glen M. Schmidt, 2012. "Consumer Valuation of Modularly Upgradeable Products," Management Science, INFORMS, vol. 58(9), pages 1761-1776, September.
    15. Ali al-Nowaihi & Sanjit Dhami, 2013. "A Theory of Reference Time," Discussion Papers in Economics 13/26, Division of Economics, School of Business, University of Leicester.
    16. Faralla, Valeria & Novarese, Marco & Ardizzone, Antonella, 2017. "Framing Effects in Intertemporal Choice: A Nudge Experiment," MPRA Paper 82086, University Library of Munich, Germany.
    17. Shotaro Shiba & Kazumi Shimizu, 2018. "Does time inconsistency differ between gain and loss? An intra-personal comparison using a non-parametric elicitation method (A revised version)," Working Papers 1807, Waseda University, Faculty of Political Science and Economics.
    18. Giles W Story & Ivo Vlaev & Peter Dayan & Ben Seymour & Ara Darzi & Raymond J Dolan, 2015. "Anticipation and Choice Heuristics in the Dynamic Consumption of Pain Relief," PLOS Computational Biology, Public Library of Science, vol. 11(3), pages 1-32, March.
    19. Shotaro Shiba & Kazumi Shimizu, 2017. "Does Time Inconsistency Differ between Gain and Loss? An Intra-Personal Comparison Using a Non-Parametric Designed Experimen," Working Papers 1714, Waseda University, Faculty of Political Science and Economics.
    20. Thomas Epper & Helga Fehr-Duda, 2012. "The missing link: unifying risk taking and time discounting," ECON - Working Papers 096, Department of Economics - University of Zurich, revised Oct 2018.
    21. Kirsten I. M. Rohde, 2019. "Measuring Decreasing and Increasing Impatience," Management Science, INFORMS, vol. 65(4), pages 1700-1716, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hrv:faseco:30367415. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office for Scholarly Communication (email available below). General contact details of provider: https://edirc.repec.org/data/deharus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.