Jonathan D. Cohen
Princeton, NJ 08544
Institutional Affiliation: Princeton University
NBER Working Papers and Publications
|July 2016||Measuring Time Preferences|
with Keith Marzilli Ericson, David Laibson, John Myles White: w22455
We review research that measures time preferences—i.e., preferences over intertemporal tradeoffs. We distinguish between studies using financial flows, which we call “money earlier or later” (MEL) decisions and studies that use time-dated consumption/effort. Under different structural models, we show how to translate what MEL experiments directly measure (required rates of return for financial flows) into a discount function over utils. We summarize empirical regularities found in MEL studies and the predictive power of those studies. We explain why MEL choices are driven in part by some factors that are distinct from underlying time preferences.
|February 2015||Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better than Delay Discounting|
with Keith M. Ericson, John Myles White, David Laibson: w20948
Heuristic models have been proposed for many domains of choice. We compare heuristic models of intertemporal choice, which can account for many of the known intertemporal choice anomalies, to discounting models. We conduct an out-of-sample, cross-validated comparison of intertemporal choice models. Heuristic models outperform traditional utility discounting models, including models of exponential and hyperbolic discounting. The best performing models predict choices by using a weighted average of absolute differences and relative (percentage) differences of the attributes of the goods in a choice set. We conclude that heuristic models explain time-money tradeoff choices in experiments better than utility discounting models.
Published: Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does Keith M. Marzilli Ericson, , John Myles White, David Laibson, , Jonathan D. Cohen, Psychological Science Vol 26, Issue 6, pp. 826 - 833 First Published April 24, 2015 https://doi.org/10.1177/0956797615572232