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Anomalies in Intertemporal Choice: Evidence and an Interpretation

Anomalies in Intertemporal Choice: Evidence and an Interpretation Abstract Research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility (EU) anomalies—behaviors that violate the expected utility axioms. The relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility (DU) anomalies. We enumerate a set of DU anomalies analogous to the EU anomalies and propose a model that accounts for the anomalies, as well as other intertemporal choice phenomena incompatible with DU. We discuss implications for savings behavior, estimation of discount rates, and choice framing effects. * We thank Wayne Ferson, Brian Gibbs, Jerry Green, Richard Herrnstein, Robin Hogarth, Mark Machina, Howard Rachlin, and, especially, Colin Camerer and Joshua Klayman for useful suggestions. The assistance of Eric Wanner, the Russell Sage Foundation, the Alfred P. Sloan Foundation, the IBM Faculty Research Fund at the University of Chicago Graduate School of Business, and the Research Division of the Harvard Business School is also gratefully acknowledged. This content is only available as a PDF. © 1992 by the President and Fellows of Harvard College http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Quarterly Journal of Economics Oxford University Press

Anomalies in Intertemporal Choice: Evidence and an Interpretation

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References (48)

Publisher
Oxford University Press
Copyright
© 1992 by the President and Fellows of Harvard College
ISSN
0033-5533
eISSN
1531-4650
DOI
10.2307/2118482
Publisher site
See Article on Publisher Site

Abstract

Abstract Research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility (EU) anomalies—behaviors that violate the expected utility axioms. The relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility (DU) anomalies. We enumerate a set of DU anomalies analogous to the EU anomalies and propose a model that accounts for the anomalies, as well as other intertemporal choice phenomena incompatible with DU. We discuss implications for savings behavior, estimation of discount rates, and choice framing effects. * We thank Wayne Ferson, Brian Gibbs, Jerry Green, Richard Herrnstein, Robin Hogarth, Mark Machina, Howard Rachlin, and, especially, Colin Camerer and Joshua Klayman for useful suggestions. The assistance of Eric Wanner, the Russell Sage Foundation, the Alfred P. Sloan Foundation, the IBM Faculty Research Fund at the University of Chicago Graduate School of Business, and the Research Division of the Harvard Business School is also gratefully acknowledged. This content is only available as a PDF. © 1992 by the President and Fellows of Harvard College

Journal

The Quarterly Journal of EconomicsOxford University Press

Published: May 1, 1992

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