30 terms

Intertemporal Choice

Intertemporal Choice
making a choice between immediate reward and delayed (future) reward
Future Delay Discount
Organisms 'discount the future' when they value imminent goods over future goods
Time preference
the relative valuation placed on a good at and earlier date compared with its valuation at a later date (people prefer immediate rewards to delayed rewards)
Issues related to intertemporal choices
reinforcement schedules
matching law
diminishing marginal returns
future discount and behavioral economics
Factors affecting SS vs. LL tradeoff
life history variable
Physiological variable
personality traits
Reinforcement with Delay
Two reward dimensions:
Amount and time (delay)
Marginal Utility (MT) & Total Utility (TU)
principle of diminishing marginal utility: as more units of a good are consumed, additional unites will provide less additional satisfaction that previous units
Exponential Discounting
Present value = Future value e-δD
(D-delay, δ sigma - exponential discounting parameter, e = 2.718281828459045)
Hyperbolic discounting
Present value = Future value /(1+kD)
(k=hyperbolic discounting parameter)
Rate-of-Return and Net present Value (NPV) Rule:
NPV = [Ct / (1 + k)D] - C0
Net present value
the investment at present (cash outflow)
the expected return at the future time (cash outflow)
the rate of discount
NPV > 0 means that the investment is _______
Behavioral economics
We generally prefer smaller, sooner payoffs to larger, later payoffs when the smaller payoffs would be imminent. When same payoffs are distant in time, we tend to prefer the larger, even though the time lag would be the same.
Hyperbolic discounting function:
Value = Value at no delay/[Constant + Impatience factor x delay]
Our preferences follow a _______ rather than the conventional exponential curve
hyperbolic curve
Future Discount in gains and losses
Losses are typically discounted over time less than gains (dynamic inconsistency).
Indifference between $100 now and $150 in a month
Discount ratio effect in intertemporal choice
discounting rates are greater for smaller rewards than larger rewards
Goal setting and intertemporal choice
People prefer improving to declining sequence of rewards of the same overall value.
People require more compensation to delay delivery of a reward than they are willing to speed up delivery of that reward by the same amount of time.
People often discount future reward particularly when they are
under stress
addicted to drugs
prompted for immediate gains
low in energy budget and blood sugar levels
Delay discounting is ______ correlated with intelligence
Working memory training ______ delay discounting among stimulant addicts
Fluctuating Blood Glucose Levels Affect Futre (Delay) Discounting (look at notes for details there is a lot of info)
Personality Traits and Future Discount
Time Perception
Time preference
Time perspectives (orientations)
Time Paradox 1
Time is one of the most powerful influences on our thoughts, feelings, and actions, yet we are usually totally unaware of the effect of time in our lives.
Time Paradox 2
Each specific attitude toward time—or time perspective—is associated with numerous benefits, yet in excess each is associated with even greater costs.
Time Paradox 3
Individual attitudes toward time are learned through personal experience, yet collectively attitudes toward time influence national destinies
Past, Present and Future Orientations
past positive
past negative
present fatalistic
present hedonistic
transcendental future
Effects of Time perspectives
Mate quality: reliable, predictable, or exciting
On time and no time society
What to satisfy for time: Family, Friends, and Fun (3 Fs)
Time perspectives and addition, depression, aggression, PTSD, the Commons dilemma, psychotherapy, campaign strategies, commercials etc Conscientious people live longer due to future oriented health behaviors