Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better than Delay Discounting
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NBER Working Paper No. 20948
Heuristic models have been proposed for many domains of choice. We compare heuristic models of intertemporal choice, which can account for many of the known intertemporal choice anomalies, to discounting models. We conduct an out-of-sample, cross-validated comparison of intertemporal choice models. Heuristic models outperform traditional utility discounting models, including models of exponential and hyperbolic discounting. The best performing models predict choices by using a weighted average of absolute differences and relative (percentage) differences of the attributes of the goods in a choice set. We conclude that heuristic models explain time-money tradeoff choices in experiments better than utility discounting models.
Document Object Identifier (DOI): 10.3386/w20948
Published: Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does Keith M. Marzilli Ericson, , John Myles White, David Laibson, , Jonathan D. Cohen, Psychological Science Vol 26, Issue 6, pp. 826 - 833 First Published April 24, 2015 https://doi.org/10.1177/0956797615572232
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