Does time inconsistency differ between gain and loss? An intra-personal comparison using a non-parametric elicitation method

Shotaro Shiba () and Kazumi Shimizu
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Shotaro Shiba: Waseda University

Theory and Decision, 2020, vol. 88, issue 3, No 4, 452 pages

Abstract: Abstract Several studies on time preference have found time inconsistency in both gain and loss preferences. However, the relationship between the two within the same person remains unclear; that is, does an individual who demonstrates time inconsistency for gain outcomes do so for losses as well? This paper reports on individuals’ time inconsistency for gains and losses in a laboratory setting. To obtain a precise comparison of individuals’ time inconsistency for gains and losses, we used Rohde’s “DI (decreasing impatience)-index” (Manag Sci 65(4):1700–1716, 2018) and measured the level of time inconsistency, rather than merely identifying whether TI was present. This index represents how strongly a person exhibits present bias, and easily extends to the comparison between gain and loss preferences within the same person. Further, it allows the experiment to test for so-called future bias, which has been a focus area in recent time inconsistency literature. It is elicited through a non-parametric method, which avoids any specification errors in the analysis. Our findings are as follows: first, we found future bias in preferences for not only gains but also losses, and we confirmed that this tendency is consistent with previous findings on preferences for gains. Second, a positive correlation between time inconsistency for gains and losses was found at the individual level. Indeed, we could not find a significant difference between the two in most cases.

Keywords: Time inconsistency; Sign effect; Future bias; Intra-personal comparison (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11238-019-09728-1

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