Anomalies in Intertemporal Choice: Evidence and an Interpretation* (2024)

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Volume 107 Issue 2 May 1992
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George Loewenstein

Carnegie Mellon University

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Drazen Prelec

Harvard University

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The Quarterly Journal of Economics, Volume 107, Issue 2, May 1992, Pages 573–597, https://doi.org/10.2307/2118482

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01 May 1992

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Abstract

Research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility (EU) anomalies—behaviors that violate the expected utility axioms. The relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility (DU) anomalies. We enumerate a set of DU anomalies analogous to the EU anomalies and propose a model that accounts for the anomalies, as well as other intertemporal choice phenomena incompatible with DU. We discuss implications for savings behavior, estimation of discount rates, and choice framing effects.

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© 1992 by the President and Fellows of Harvard College

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