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Magnitude Effect in Intertemporal Allocation Tasks

Chen Sun and Jan Potters

No 159, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We investigate how intertemporal allocation of monetary rewards is influenced by the size of total budget, with a particular interest in the channels of influence. We find a significant magnitude effect: the budget share allocated to the later date increases with the size of the budget. At the aggregate level as well as at the individual level, we find magnitude effects both on the discount rate and on intertemporal substitutability (i.e. utility curvature). The latter effect is consistent with theories in which the degree of asset integration is increasing in the stake.

Keywords: time preference; magnitude effect; convex time budget method (search for similar items in EconPapers)
JEL-codes: C91 D12 D91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-upt
Date: 2019-06-24
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