Weighing outcomes by time or against time? Evaluation rules in intertemporal choice

Area of Science:

• Behavioral Economics
• Cognitive Science
• Decision Science

Background:

• Intertemporal choice models explain how people value future rewards over immediate ones.
• Common models include hyperbolic discounting, interval discounting, and tradeoff models.
• Previous research often assumes future outcomes are simply discounted.

Purpose of the Study:

• To compare three prominent evaluation rules for intertemporal choice: hyperbolic discounting, interval discounting, and tradeoff models.
• To investigate how people choose between smaller sooner and larger later monetary outcomes.
• To challenge the conventional view of discounting future outcomes.

Main Methods:

• Utilized a Bayesian analysis to compare parametric functional forms of the three models.
• Applied these models to choices involving smaller sooner versus larger later monetary outcomes.
• This quantitative cognitive modeling approach was novel for intertemporal choice research.

Main Results:

• The hyperbolic discounting model was outperformed by the interval discounting model.
• The interval discounting model was, in turn, outperformed by the tradeoff model.
• Found quantitative evidence supporting direct comparison of options along time and outcome attributes.

Conclusions:

• The tradeoff model provides a superior explanation for intertemporal choices compared to hyperbolic or interval discounting.
• Results challenge the conventional discounting view, favoring attribute-based comparisons.
• Suggests people evaluate both the timing and magnitude of outcomes simultaneously.