Beyond discounting: the tradeoff model of intertemporal choice

Marc Scholten and Daniel Read

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Research on intertemporal judgments and choices between a smaller-sooner and a larger-later outcome has revealed many anomalies to the discounted-utility model. Attempts to account for these anomalies within the discounting paradigm have resulted in convoluted and psychologically opaque models. We therefore develop a new model of intertemporal choice, the tradeoff model, in which choice results from a tradeoff between the perceived time difference (interval) and the perceived outcome difference (compensation). This model is both more parsimonious and more intuitive than any rival discounting model of comparable scope. Moreover, it accurately describes archival data as well as data from a new experiment.

JEL-codes: J1 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:22710

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