Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better than Delay Discounting / Keith M. Ericson, John Myles White, David Laibson, Jonathan D. Cohen.

Format:

Book

Author/Creator:

Ericson, Keith M.

Contributor:

National Bureau of Economic Research.

White, John Myles.

Laibson, David.

Cohen, Jonathan D.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20948.

NBER working paper series no. w20948

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

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.

Notes:

Print version record

February 2015.