Long-Range Financial Decision-Making: The Role of Episodic Prospection

Gianni Brighetti, Caterina Lucarelli, Nicoletta Marinelli and Giulia Giansiracusa
Additional contact information
Gianni Brighetti: University of Bologna
Giulia Giansiracusa: University of Bologna

Chapter 10 in Bank Funding, Financial Instruments and Decision-Making in the Banking Industry, 2016, pp 253-277 from Palgrave Macmillan

Abstract: Abstract Individuals often show time-inconsistent preferences when making intertemporal choices for monetary rewards. Time-inconsistent preferences generally emerge when observing the devaluation of outcomes over time (temporal discounting) that do not follow an exponential discounting function, but rather hyperbolic discounting. In this paper, we argue that temporal discounting is sensitive to the type of prospection involved. Given that episodic prospection (when individuals can vividly envisage possible future events) increases the subjective importance of a future reward, we investigate if and how it can effectively attenuate human biases of temporal discounting. Our findings suggest that episodic prospection might attenuate intertemporal choice inefficiencies, when in the form of hyperbolic discounting. This was found to be particularly true if the solicited scenario referred to a primary need (a first priority).

Date: 2016
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-30701-5_10

Ordering information: This item can be ordered from
http://www.palgrave.com/9783319307015

DOI: 10.1007/978-3-319-30701-5_10

Access Statistics for this chapter

More chapters in Palgrave Macmillan Studies in Banking and Financial Institutions from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().