Tempospect Theory of Intertemporal Choice
- 1 Department of Behavioral Science, Center for Experimental Research in Social Sciences, Hokkaido University, Hokkaido, Japan
- 2 Department of Behavioral Science, Center for Experimental Research in Social Sciences, Hokkaido University, Hokkaido, Japan
Abstract
Anomalies in intertemporal choice (e.g. hyperbolic discounting, subadditive discounting, a sign effect, a magnitude effect, and a delay-speedup asymmetry) have been investigated in neuroeconomics and behavioral neuroeconomics. In this study we propose a “tempospect” theory of intertemporal choice which can account for these anomalies in intertemporal choice. The key features of the present theory are: 1) decision over time is made with psychological time; and 2) psychological time is determined by a change in delay until receipt (i.e., positive or negative time-interval between options); 3) psychological time is less sensitive to a decrease in delay in comparison to an increase in delay; and 4) psychological time is influenced by the sign and magnitude of the delayed outcomes. Implications of the present theory for neuroeconomics are discussed.
- Al-Nowaihi, A., & Dhami, S. (2006). A note on the Loewenstein-Prelec theory of intertemporal choice. Mathematical Social Sciences, 52, 99-108. doi:10.1016/j.mathsocsci.2006.04.001
- Al-Nowaihi, A., & Dhami, S. (2009). A value function that explains the magnitude and sign effects. Economics Letters, 105, 224-229. doi:10.1016/j.econlet.2009.08.004
- Bickel, W. K., & Marsch, L. A. (2001). Toward a behavioral economic understanding of drug dependence: Delay discounting processes. Addiction, 96, 73-86. doi:10.1046/j.1360-0443.2001.961736.x
- Cajueiro, D. (2006). A note on the relevance of the q-exponential function in the context of intertemporal choices. Physica A, 364, 385-388. doi:10.1016/j.physa.2005.08.056
- Destefano, N., & Martinez, A. (2011). The additive property of the inconsistency degree in intertemporal decision making through the generalization of psychophysical laws. Physica A, 390, 1763-1772. doi:10.1016/j.physa.2011.01.016
- Estle, S. J., Green, L., Myerson, J., & Holt, D. (2006). Differential effects of amount on temporal and probability discounting of gains and losses. Memory and Cognition, 34, 914-928. doi:10.3758/BF03193437
- Frederick, S., Loewenstein, G., & O’Donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of Economic Literature, 40, 351-401. doi:10.1257/002205102320161311
- Kable, J., & Glimcher, P. (2007). The neural correlates of subjective value during intertemporal choice. Nature Neuroscience, 10, 1625- 1633. doi:10.1038/nn2007
- Kahneman, D., & Tversky, A. (1979). Prospect theory—Analysis of decision under risk. Econometrica, 47, 263-291. doi:10.2307/1914185
- Loewenstein, G. (1988). Frames of mind in intertemporal choice. Management Science, 34, 200-214. doi:10.1287/mnsc.34.2.200
- Loewenstein, G., & Prelec, D. (1992). Anomalies in intertemporal choice: Evidence and Interpretation. Quarterly Journal of Economics, 107, 573-597. doi:10.2307/2118482
- McClure, S., Laibson, D., Loewenstein, G., & Cohen, J. (2004). Separate neural systems value immediate and delayed monetary rewards. Science, 306, 503-507. doi:10.1126/science.1100907
- Read, D. (2001). Is time-discounting hyperbolic or subadditive? Journal of Risk Uncertainty, 23, 5-32. doi:10.1023/A:1011198414683
- Read, D., & Roelofsma, P. (2003). Subadditive versus hyperbolic discounting: A comparison of choice and matching. Organizational Behavior and Human Decision Processes, 91, 140-153. doi:10.1016/S0749-5978(03)00060-8