Intertemporal similarity: Discounting as a last resort

Authors

Jeffrey R. Stevens, University of Nebraska-LincolnFollow

Date of this Version

2016

Document Type

Article

Citation

Published as: Stevens, J.R. (2016). Intertemporal similarity: Discounting as a last resort. Journal of Behavioral Decision Making, 29, 12-24. http://dx.doi.org/10.1002/bdm.1870

Comments

Copyright © 2015 John Wiley & Sons, Ltd. Used by permission.

Abstract

Standard models of intertemporal choice assume that individuals discount future payoffs by integrating reward amounts and time delays to generate a discounted value. Alternative models propose that, rather than integrate across them, individuals compare within attributes (amounts and delays) to determine if differences in one attribute outweigh differences in another attribute. For instance, Leland (2002) and Rubinstein (2003) propose models that 1) compare the two reward amounts to determine whether they are similar, 2) compare the similarity of the two time delays, and then 3) make a decision based on these similarity judgments. Here, I tested discounting models against attribute-based models that use similarity judgments to make choices. I collected intertemporal choices and similarity judgments for the reward amounts and time delays from participants in three experiments. All experiments tested the ability of discounting and similarity models to predict intertemporal choices. Model generalization analyses showed that the best predicting models started with similarity judgments and then, if similarity failed to make a prediction, resorted to discounting models. Similarity judgments also matched intertemporal choice data demonstrating both the magnitude and sign effects, thereby accounting for behavioral data that contradict many discounting models. These results highlight the possibility that attribute-based models such as the similarity models provide alternatives to discounting that may offer insights into the process of making intertemporal choices.