An Investigation of Time Inconsistency

Serdar Sayman () and Ayse Öncüler ()
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Serdar Sayman: College of Administrative Sciences and Economics, Koç University, Istanbul 34450, Turkey
Ayse Öncüler: ESSEC Business School, 95021 Cergy, France

Management Science, 2009, vol. 55, issue 3, 470-482

Abstract: Preference between two future outcomes may change over time--a phenomenon labeled as time inconsistency. The term "time inconsistency" is usually used to refer to cases in which a larger-later outcome is preferred over a smaller-sooner one when both are delayed by some time, but then with the passage of time a preference switches to the smaller-sooner outcome. The current paper presents four empirical studies showing that time inconsistency in the other direction is also possible: A person may prefer the smaller-sooner outcome when both options are in the future, but decide to wait for the larger-later one when the smaller option becomes immediately available. We find that such "reverse time inconsistency" is more likely to be observed when the delays to and between the two outcomes are short (up to a week). We propose that reverse time inconsistency may be associated with a reversed-S shape discount function, and provide evidence that such a discount function captures part of the variation in intertemporal preferences.

Keywords: time inconsistency; reverse time inconsistency; time preference; intertemporal preferences (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (67)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:55:y:2009:i:3:p:470-482

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