To deal with self-control problems, many people precommit themselves to doing more of some good behavior or less of a bad behavior in the future (e.g., paying a large gym membership rather than paying per visit or alcoholics taking Antabuse before socializing). Please suggest a new (non-existing) product or service using prepayment (or some other form of binding pre-commitment) to help people with a selfcontrol problem. Make sure to specify what consumer self-control problem the product or service is meant to help. How would you market this product or service to your target customers? (Hint: Think about where/when advertising would be most effective and to whom. Do not just discuss stuff you learned in marketing classes.) You cannot write about gym, food/meal services, or textbook subscriptions.

Write-ups have a strict 600-word limit and are penalized for exceeding 600 words (1 point per 50 words, rounded up). Shorter write-ups also tend to do poorly. Aim for 500-600 words.  Include the word count and your student ID at the top of the document (e.g., “Word Count: 598”). Do NOT include your name or question prompt.  No fluff rule: Your goal is to show your understanding. Please do NOT write an intro, background, or conclusion. Also do NOT define terms and avoid quoting directly from readings or slides. DO make sure to do the readings thoroughly (the optional ones for that topic may help). Knowledge cannot be faked.

Tips for mastering the write-ups: There rarely exist right answers to these questions. That’s what makes the prompts interesting, useful, and fun (we hope). Good write-ups will always reflect a solid understanding of the material but more importantly you should be able to apply the concepts to the prompt. This means that you should not provide definitions and examples from the reading, but instead figure out what concepts are relevant and how they apply to this business situation. The following are a few tangible, specific tips based on years of grading write-ups. I offer them to you in roughly decreasing order of how frustrating their violations are to a grader. 1.Don’t regurgitate the reading. You never need to waste space including definitions from the reading. Write as if your audience not only has read the assigned materials but also knows them well. When necessary, cite a concept as briefly as possible. The fact that you’ve done the reading should be revealed to us by your thinking, NOT by some quotation. 2.Start quickly and end abruptly. For these short write-ups, introductions, background, and conclusions are almost entirely unnecessary. Even worse, they take away space that is much better used in other ways. We don’t expect these things to read like English compositions. Nor are we strangers to why you’re writing in the first place. Jump right in. 3.Choose specific over abstract. Precision is good. It’s good for communication, and it’s good for sharpening thinking. When you feel yourself getting fuzzy, think to yourself: I need an example. We love examples. Make it real. 4.Be realistic. There is nothing more irritating than a cute suggestion (for example, of how an organization might mitigate a particular bias) that works theoretically but is utterly infeasible in the real world. Perhaps the best criterion is to ask yourself if you’d be willing to sit in a manager’s office advocating his or her use of your recommendation. 5.Less is more. Believe it or not, a common mistake is to include too many ideas — not because too many ideas itself is bad, but because these ideas, as intriguing, tantalizing, and, yes, right as they might be, are often too poorly developed. Don’t make this mistake! We’re not impressed with laundry lists. It’s much better to write about a few things really well.

Journal of Economic Perspectives- Volume 3, Number 4- Fall 1989-Pages 181-193

Anomalies
Intertemporal Choice

George Loewenstein and Richard H. Thaler

Economics can be distinguished from other social sciences by the belief that most
(all?) behavior can be explained by assuming that agents have stable, well-defined
preferences and make rational choices consistent with those preferences in markets
that (eventually) clear. An empirical result qualifies as an anomaly if it is difficult to
“rationalize,” or if implausible assumptions are necessary to explain it within the
paradigm. This column will present a series of such anomalies. Readers are invited to
suggest topics for future columns by sending a note with some references to (or better
yet copies of) the relevant research. Comments on anomalies printed here are also
welcome. The address is: Richard Thaler, c/o Journal of Economic Perspectives, Johnson
Graduate School of Management, Malott Hall, Cornell University, Ithaca, NY 14853.

Introduction

Intertemporal choices, decisions in which the timing of costs and benefits are
spread out over time, are both common and important. How much schooling to
obtain, whom to marry, whether to have children, how much to save for retirement,
how to invest, whether to buy a house, and if so which house to buy-all these vital
decisions have strong intertemporal components. As examples of individual decision

* George Loewenstein is Associate Professor, Graduate School of Business, University of Chicago,
Chicago, Illinois and Visiting Scholar, Russell Sage Foundation, New York, New York. Richard
Thaler is Henrietta Johnson Louis Professor of Economics, Johnson Graduate School of Manage-
ment, Cornell University, Ithaca, New York.

182 Journal of Economic Perspectives

making, intertemporal choices are also interesting because the relevant economic
theory makes unusually testable predictions. In many contexts, economic theories of
individual behavior are untestable because the predictions are too vague. Almost an

y

choice, no matter how bizarre, can be rationalized by finding some utility function for
which the choice represents an optimal solution. In contrast, for decisions involving
choices between time streams of money (receipts and payments), economic theory
makes a precise and testable prediction, namely that (at the margin) people should
discount money streams at the (after-tax) market rate of interest (r).

The existence of capital markets creates what amounts to an internal arbitrage
opportunity for the consumer. If presented with an investment option that pays off at
a rate higher than r, the consumer can enjoy greater consumption in every period by
accepting the option and borrowing appropriately at rate r. Options that pay less
than r should be rejected since they are dominated by lending in the capital market.
The implication is that consumers should make intertemporal trade-offs so that their
marginal rate of time preference equals the interest rate. Furthermore, consumers
should be consistent in their intertemporal choices. The discount rate used should be
constant across situations and over time. However, research shows that depending on
the context examined, the implied discount rates of observed behavior can vary from
negative to several hundred percent per year.

A well-known example of apparent negative discount rates is the fact that a large
majority of U.S. taxpayers receive refunds every year from the Internal Revenue
Service. These interest-free loans to the government are easily avoidable by adjusting
the withholding rate. Similarly, many school teachers are given the choice between
being paid in 9 monthly installments (September-June) or 12 (September-August).
Most of those given this choice elect the latter option. Finally, studies of life-cycle
consumption choices reveal that consumption tends to increase over time until
retirement. In the absence of binding borrowing constraints, this pattern can only be
consistent with the life-cycle theory if people have negative discount rates (see,
Courant, Gramlich, and Laitner, 1986).

Examples of extremely high discount rates are also easy to find. A recent change
in West Virginia law provides an example. Students under the age of 18 who drop out
of school lose their driving permits. The first year results indicate that this law has
reduced the dropout rate by one-third. It seems implausible that one-third of the high
school dropouts were so close to the margin that the loss of driving privileges for a
year or two (or more precisely, the expected costs of driving illegally for this period)
could tip a rational human capital investment decision toward completing high
school. Rather, the behavior seems to reveal extremely myopic preferences. A similar
myopia is evident in the lament of a dermatologist that her warnings about the risk of
skin cancer have little effect, but “My patients are much more compliant about
avoiding the sun when I tell them that it can cause large pores and blackheads.”

It is not just teenagers and sun lovers who display high discount rates. Most
homeowners have too little insulation in their attics and walls, and fail to buy more
expensive energy-efficient appliances even when the pay-back period for the extra
expense is less than a year. Hausman’s (1979) study of air conditioner purchases,

Loewenstein and Thaler 183

which examined consumer tradeoffs between purchase price and delayed energy
payments, estimated an average consumer discount rate of about 25 percent. A
subsequent study by Gately (1980) comparing pairs of refrigerators differing only in
energy use and initial purchase price revealed that the implicit discount rates
associated with purchasing the cheaper models were incredibly high: from 45 to 13

0

percent assuming an electricity cost of 3.8 cents per kilowatt hour, and from 120 to
300 percent at 10 cents per kilowatt hour. Most recently, Ruderman, Levine and
McMahan (1986) computed the discount rates implicit in several different kinds of
appliances (for the average model on the market, relative to the most efficient): space
heaters, air conditioners, water heaters, refrigerators and freezers. They found that the
implicit discount rate for room air conditioners was 17 percent, somewhat lower than
Hausman’s estimate. However, the discount rates for other appliances were much
higher, e.g., gas water heater, 102 percent; electric water heater, 243 percent; and
freezer, 138 percent. Economic theory has a clear prediction about these inefficient
appliances-they will not be produced. But they are produced, and purchased.’

So, as usual, where there are testable predictions, there are anomalies. The
remainder of this column examines a number of situations in which people do not
appear to discount money flows at the market rate of interest or any other single
discount rate. Discount rates observed in both laboratory and field decision-making
environments are shown to depend on the magnitude and sign of what is being
discounted, on the time delay, on whether the choice is cast in terms of speed-up or
delay, on the way in which a choice is framed, and on whether future benefits or costs
induce savoring or dread.

Variations in the Discount Rate for an Individual

An experiment that investigated the first three of these effects was presented in
Thaler (1981). Subjects (mostly students) were asked to imagine that they had won
some money in a lottery conducted by their bank. They could take the money now or
wait until later. They were asked how much they would need to be paid to make
waiting as attractive as immediate payment. Each subject received a 3 X 3 table to fill
in with amounts of money varied along one dimension and length of time along the
other. Four versions of the questionnaires were used, three involving gains, and one
involving losses. In the losses version, subjects were asked to imagine that they had
been issued a traffic fine that could either be paid at face value now or at an increased

‘Two other explanations might be offered for the purchase of inefficient appliances: ignorance and
illiquidity. According to the ignorance hypothesis, customers do not know, or bother to find out, the
advantages of buying a more efficient model even though that information is plainly displayed on
government mandated labels. According to the illiquidity argument, customers are so short of cash that they
cannot afford to buy the more efficient model. (Of course, these are precisely the customers who cannot
afford to buy the cheaper model!) Since most appliances are probably purchased on credit, and since the
extra cost of the energy efficient model is relatively small, it seems unlikely that borrowing constraints are
really the answer.

184 Journal of Economic Perspectives

price later. In all cases subjects were asked to assume that there was no risk of not
getting the reward (or of avoiding the fine) if they waited. All amounts were to be
received (or paid) by mail.2 The experiment thus manipulated the three variables of
interest: the length of time to be waited; the magnitude of the outcome; whether the
outcome is a gain or loss.

Three strong patterns emerged from the subjects’ responses. First, discount rates
declined sharply with the length of time to be waited, consistent with earlier findings
for animals (Herrnstein, 1961; Ainslie, 1975). Second, discount rates declined with the
size of the reward. Discount rates for small amounts (under $100) were very high,
while those for larger amounts were more reasonable. Third, discount rates for gains
were much higher than for losses. Subjects needed to be paid a lot to wait for a
reward, but were unwilling to pay very much to delay a fine.

These three findings have been replicated in a much larger study by Benzion,
Rapoport, and Yagil (1989). They used a 4 X 4 X 4 design which manipulated the
time delay (0.5, 1, 2, and 4 years), amount of money ($40, 200, 1000, and $5000), and
scenario (postponing a gain; postponing a loss; expediting a gain; and expediting a
loss). The subjects were undergraduate and graduate students in economics and
finance at two Israeli universities, a relatively sophisticated subject pool. Their results
are shown in Figure 1 (averaging across the four scenarios). As can be seen clearly,
discount rates again decline sharply with the length of time to be waited and the size
of the prize.3

We will discuss each of these three strong patterns of discount rate variations in
turn.

Dynamic Inconsistency
The negative relationship between discount rates and time delay has important

consequences for the dynamic consistency of behavior. Suppose, as illustrated in
Figure 2, that an individual must choose between two rewards, a small early reward S,

2In this study, and some others described here, the questions asked were hypothetical. Of course, all things
being equal it would be better to study actual choices. However, there are serious trade-offs between
hypothetical and real money methods. Using hypothetical questions one can ask subjects to consider options
that incorporate large amounts of money, both gains and losses, and delays of a year or more. In studies
using real choices, the experimenter must reduce the size of the stakes and the length of the delay, and it is
difficult to investigate actual losses. Also, in a hypothetical question, one can ask the subject to assume that
there is no risk associated with future payments, while in experiments using real stakes, subjects must assess
the experimenter’s credibility. It is reassuring that in this domain, as well as many others, the phenomena
discovered using hypothetical choices have been reproduced in studies using actual choices, see for example,
Horowitz (1988), and Holcomb and Nelson (1989).
3It is obvious that whatever pattern of choices subjects indicate in these experiments, market interest rates
do not depend (greatly) on either magnitude or time delay, but this does not imply that the experimental
evidence is irrelevant for economics. Economics is concerned with predicting both market prices and
individual behavior. Though arbitrageurs may assure that one cannot earn (much) more interest from
buying and selling a series of 12 one-month treasury bills than a single one-year bond, this does not
guarantee that predictions at the individual level will be accurate. If car customers elect financing over
more attractive rebates, no (costless) arbitrage opportunity exists for anyone else. A bank could try to
convince car buyers that they would be better off taking the rebate and financing the purchase at their
bank, but such campaigns are expensive, and consumers may be skeptical regarding the impartiality of the
advice they are being given.

Anomalies 185

Figure 1
Discounting as a Function of Time Delay and Money Amount.

0.5 –

0.45

0.4 – -$40

0.35 –

0.3

a \X$~~~200\
0.25-

0

0. $1 ,0 0 0-
0.2-

0.15-

0.1-

0.05_

0 I I
0.5 1 2 4

Delay in years

Source: Benzion et al. (1989).

which occurs at t11 and a bigger later reward B, which occurs at t2.4 The lines
represent the present utility of the rewards as perceived by the individual at different
points in time. If the individual discounts the future at a constant rate, that is, if
discounting is constant for different time delays, then the curves will never cross.
However, if discounting decreases as a function of time delay, as the empirical
research suggests, then the curves may cross, leading to a reversal of preference. When
both rewards are sufficiently distant, the individual prefers B, but as S becomes more
proximate, its relative value increases until at t*, S abruptly comes to dominate B in
terms of present utility. The significance of the crossing curves is that behavior will not
generally be consistent over time. In the morning, when temptation is remote, we vow
to go to bed early, stick to our diet, and not have too much to drink. That night we
stay out until 3:00 a.m., have two helpings of chocolate decadence, and sample every
variety of Aquavit at a Norwegian restaurant. Applied to saving, as Strotz (1956)

4This analysis is based on Ainslie (1975).

186 Journal of Economic Perspectives

Figure 2
Non-Exponential Discounting.

U~~~~~~~~~~~~~~

y

t* t t2
Time

Source: Ainslie (1975).

demonstrated, if the discount rate declines over time, then people will always consume
more in the present than called for by their previous plans.

The problem of dynamic inconsistency raises questions about consumer
sovereignty. Who is sovereign, the self who sets the alarm clock to rise early, or the self
who shuts it off the next morning and goes back to sleep? It is instructive that we
normally see the far-sighted self take actions which constrain or alter the behavior of
the myopic self. Dieters pay money to stay on “fat farms” whose main appeal is that
they guarantee to underfeed their guests; alcoholics take antabuse which causes
nausea and vomiting if they take a drink; smokers buy cigarettes by the pack (rather
than by the carton which is cheaper). And, though no longer fashionable, for many
years Christmas clubs were extremely popular in the U.S. These savings plans offered
the unusual combination of inconvenience (deposits were made in person every week),
illiquidity (funds could not be withdrawn until late November), and low interest (in
some cases, zero interest). Of course, illiquidity was the Christmas club’s raison d’etre
since customers wanted to assure themselves of funds to pay for Christmas presents.
Recognizing the limited ability of conventional decision models to account for
self-binding behavior and other forms of intrapersonal conflict, a number of authors
have proposed models that view economic behavior as an internal struggle between
multiple selves with conflicting preferences (Ainslie 1975, forthcoming; Elster, 1979;
Schelling, 1984; Thaler and Shefrin, 1981; Winston, 1980).

Magnitude Effects
The effect of magnitude on the discount rate is as strong as the effect of time

delay. In both the Thaler and Benzion et al. studies using hypothetical questions, the
implicit discount rates declined sharply with the size of the purchase. A similar result
has been observed by Holcomb and Nelson (1989) over a small range of actual
payoffs, $5-$17. Also, the very high discount rates observed for relatively small
hypothetical rewards were obtained by Horowitz (1988) for an actual payoff of $50.

Loewenstein and Thaler 187

There are two plausible behavioral explanations for the magnitude effect. The
first is based on the psychology of perception (psychophysics): people are sensitive not
only to relative differences in money amounts, but also to absolute differences
(Loewenstein and Prelec, 1989b). The perceptual difference between $100 now and
$150 in a year, for example, appears greater than the difference between $10 now and
$15 in one year, so that many people are willing to wait for the extra $50 in the first
instance, but not for the $5 in the second. The second explanation relies on notions of
mental accounting (Shefrin and Thaler, 1988). Suppose that small windfalls are
entered into a mental checking account and are largely consumed, while larger
amounts are entered into a mental savings account, with a much smaller propensity to
consume. Then the cost of waiting for a small windfall may be perceived to be
foregone consumption, while in contrast, the opportunity cost of waiting for a large
windfall is perceived as simply foregone interest. If foregone consumption is more
tempting than foregone interest, the magnitude effect will be observed.5 (The next
installment in this feature, on savings, will discuss these issues in more detail).

Sign Effects
The third strong empirical regularity in the discounting surveys is that the

discount rate for gains is much greater than for losses. People are quite anxious to
receive a positive reward, especially a small one, but are less anxious to postpone a
loss. Part of this preference comes from a simple “debt aversion.” Many people pay
off mortgages and student loans quicker than they have to, even when the rate they
are paying is less than they earn on safe investments.

Reference Points

In descriptive theories of decision making under uncertainty, the distinction
between gains and losses has received considerable attention. Decision makers do not
appear to integrate outcomes with their wealth or existing consumption level, as
normally assumed in expected utility theory. Rather individuals appear to react to
events as changes, relative to some natural reference point. This observation was first
made by Markowitz (1952), and more recently Kahneman and Tversky (1979) use
changes in wealth relative to a reference point as the carriers of value in their prospect
theory.

Reference points are also important in intertemporal choice (Loewenstein and
Prelec, 1989a). Loewenstein (1988) offers the following demonstration of a reference
point effect. An experiment was conducted using 105 high school sophomores and
juniors. All subjects received a $7 gift certificate for a local record shop. The expected
time at which the students would receive the certificates was varied among one, four,

5It seems likely that there are also differential discount rates by type of consumption good. One might be
more impatient to receive a new car than a new (energy-efficient) furnace, as long as the old furnace works.
More research is needed on this question.

188 Journal of Economic Perspectives

Table I
Mean Amounts to Speed-up and Delay Consumption
($7 Record Store Gift Certificate)

Time Interval Delay Speed-up Sign ficance

1 week versus 4 weeks $1.09 $.25 .001
4 weeks versus 8 weeks $.84 $.37 .005
1 week versus 8 weeks $1.76 $.52 .001

and eight weeks. The students were then given a series of binary choices between
keeping their certificates at the originally appointed times, or trading them either for
smaller certificates to be received earlier, or for larger certificates to be received later.
For example, subjects who expected to receive a four week certificate were asked
whether they would trade it for an eight week certificate, the value of which was
varied between $7.10 and $10.00. They were told that the experimenter would select
and implement one of their choices at random.

The design of this experiment allows the role of the reference point to be
empirically tested. Some subjects were asked to make a tradeoff between the size of the
reward and its delay from week 1 to week 4, while other subjects were making a
tradeoff between the size of the reward and its speed-up from week 4 to week 1. If
subjects were not influenced by reference points, then this manipulation would have
no effect. The results of the experiment are shown in Table 1. The figures shown are
the mean minimum amounts to speed up or delay consumption, depending on the
condition. For all three comparisons, the mean delay premium is at least twice the
mean speed-up cost, with all differences being statistically significant. Subjects de-
mand more to wait past the expected arrival date than they are willing to pay to
speed up its expected arrival. (Similar results are obtained by Benzion et al., 1989.)
The result is compatible with Kahneman and Tversky’s notion of loss aversion, the idea
that the disutility of losing a given amount of money is significantly greater in
absolute value than the utility of gaining the same amount.

Loss aversion also induces preferences for particular patterns of consumption over
time. In situations when past consumption levels set reference points for future
consumption, individuals may prefer an increasing consumption profile. For example,
Loewenstein and Prelec (1989a) asked 95 Harvard undergraduates three questions.
First, the students were asked to choose between two free dinners to be consumed on a
Friday night in one month: a dinner at a fancy French restaurant, or a dinner at a
local Greek restaurant. Most had the good sense to prefer the French dinner. Then,
they were asked whether they would rather have the French dinner in one month or
two months. Of those who selected the French dinner originally, 80 percent preferred
to have it in one month rather than two, implying a positive discount rate. The third
question offered subjects two hypothetical meals, the first in one month, the second in
two months. Subjects were asked which order they preferred: Greek in one month, or

Anomalies 189

French in two months; or French in one month, and Greek in two months. Here, 57

percent of the French food lovers elected to have the Greek meal first. In a standard

utility framework, this latter response implies a negative rate of time preference,
inconsistent with the answer to the second question. There is no inconsistency,

however, if people evaluate current consumption relative to past consumption and are

loss averse. They simply prefer a pattern of increasing utility over time.

The preference for a rising consumption profile helps explain an anomaly in

labor markets, namely that wages rise with age even when productivity does not

(Medoff and Abraham, 1980). In many academic departments, for example, the

highest paid faculty are the oldest, even if they are no longer the most productive. The

two most important standard explanations for this pattern involve specific human

capital and agency costs. The human capital argument is that firms offer the

increasing age-earnings profile to encourage workers to stay in the firm long enough to

make firm-specific training pay off. The agency cost argument, due to Lazear (1981),

suggests that firms offer wages above marginal product for older workers to prevent

workers from cheating and shirking. (A worker who gets caught risks losing the

present value of the difference between pay and productivity.) While both of these

explanations have merit in some occupations (see the articles by Carmichael and by

Hutchens in this issue), Frank and Hutchens (forthcoming) show that the same pattern
of wages is observed for two occupations in which neither traditional explanation is

plausible, namely airline pilots and intercity bus drivers. In the case of pilots, Frank

and Hutchens show that wages increase sharply with age while productivity does not.

Yet, virtually all the training pilots receive is general, and pilots who shirk on (say)

safety are amply punished by nature. Rather, in this case, it seems that the upward

sloping age-earnings profile must be due to a preference for income growth, per se.

Evidence for such a pattern of preferences comes from a survey of 100 adults

polled at the Museum of Science and Industry in Chicago (Loewenstein and

Sicherman, 1989). Respondents were asked to choose between several hypothetical

jobs which lasted six years and were identical except in the wage profile they offered.

All jobs paid the same total undiscounted wages but differed in slope. For one job,

wages decreased yearly. For another, they remained constant, and for the remaining
five they increased at varying rates. In addition to interest, virtually every economic

consideration favored the job with declining wages. For example, if the subject didn’t

like the job and quit, or was fired before the end of the six years, the declining wage

option would provide greater total payments. Despite the incentives for selecting the

decreasing wage profile, only 12 percent of the subjects liked it best. Another 12

percent preferred the flat profile, with all other subjects selecting one of the increasing
profiles as their favorite.

A result such as this one always makes an economist wonder whether the subjects

were just confused. Certainly, if the subjects had the logic of the economic argument

explained to them (that the downward sloping wage profile plus saving dominates the

others) they would come to their senses, right? To check on this, subjects were asked

their preferences again, but after they had been were presented with the economic

argument favoring the declining profile, and with psychological arguments in favor of

190 Journal of Economic Perspectives

increasing profiles. The effect of these arguments was minimal. The number of
subjects preferring the increasing profile fell from 76 to 69 percent.

The preference for an increasing income stream can be understood by using two
concepts discussed above: loss aversion and self-control. Loss aversion explains why
workers prefer an increasing consumption profile (since the utility of current consump-
tion will depend on previous consumption). Costly self-control explains why workers
want an increasing income profile, because they cannot rely on themselves to save
enough from a flat income (or declining) profile to produce the desired increasing
consumption profile.

Savoring and Dread

The standard discounted utility model assumes that the discount rate is constant
and, normally, positive. Are there any circumstances in which people prefer to have
gains postponed or losses expedited? Marshall (1891, p. 178) suggested one negative
influence on the discount rate for gains: “‘When calculating the rate at which a future
benefit is discounted, we must be careful to make allowance for the pleasures of
expectation.” We will use the terms savoring to refer to the positive utility derived from
anticipating future pleasant outcomes and dread to refer to the negative contemplation
of unpleasant outcomes.

The influence of both savoring and dread is demonstrated in the following
experiment conducted by Loewenstein (1987). Subjects were asked to specify “the
most you would pay now” to obtain (avoid) each of five outcomes, immediately, and
following delays of: 3 hours, one day, 3 days, 1 year, and ten years. The five outcomes
were: gain $4; lose $4; lose $1000; receive a (non-lethal) 110 volt shock; receive a kiss
from the movie star of your choice. The results are plotted in Figure 3.

Discounted utility predicts that the value of a gain and the aversiveness of a loss
should decline monotonically with delay before the event occurs. People should want
to consume gains as soon as possible and postpone losses as long as possible. As can be
seen, however, the two non-monetary outcomes yielded quite different patterns of time
preference. For the kiss from the movie star, subjects preferred to delay the outcome
for three days, presumably to savor its anticipation. For the electric shock, subjects
were willing to pay substantially more to avoid a shock to be received in one or ten
years than one in the immediate future. In this case subjects seemed to be willing to
pay to avoid having to worry about the event over an extended period of time.

While a kiss from a movie star and an electric shock are rather exotic experiences,
Loewenstein (1987) has also obtained similar results for more mundane items. In a
demonstration of the utility of savoring, 84 percent of his subjects indicated that they
would prefer to receive a dinner at a fancy French restaurant on the second of three
weekends rather than the first. To demonstrate dread, subjects were asked: (p. 674)
“What is the least amount of money you would accept for cleaning 100 hamster cages
at the Psychology Department’s animal laboratory. You will be paid immediately…
The job is unpleasant but takes only three hours. How much would you need to be

Loewenstein and Thaler 191

Figure 3
Maximum Payment to Obtain / Avoid Outcomes at Selected Times.
Proportion of Current Value (N = 30).

2.0 –

B L__~~~~~~~~~~~~~hc 1.5-

1.0

0

0.5

0.0
Immediately 3 hours 24 hours 3 days 1 year 10 years

Time delay

Source: Loewenstein (1987)

paid to clean the cages: (1) once during the next 7 days; (2) once during the week
beginning one year from now?” The mean reservation wage for cleaning the cages
next week was $30 while the reservation wage for doing the task in a year was $37. In
fact, only 2 of 37 subjects gave a smaller response to question (2) than question (1).

Commentary

The policy implications of this line of research are both interesting and treacher-
ous. At a micro level, the high discount rates observed in some contexts (such as
appliance purchases) and by some groups (such as teenagers) raise serious questions
about consumer rationality. (As mentioned above, in many intertemporal situations
involving self-control, individuals question their own ability to make rational, long-term
choices.) How can it be rational for a consumer to choose a refrigerator that costs $50
less than another equivalent model but consumes $50 more in electricity every year?
While such cases do not establish a need for government intervention, the presumption
that consumers choose best for themselves is rather weakened.

At a macro level, the psychology of intertemporal choice complicates the already
complicated question of selecting the proper social rate of discount. The standard view
is that the market rate of interest, corrected for tax distortions, represents an

192 Journal of Economic Perspectives

aggregation of individual time preferences, and is the appropriate social rate of time
discounting. However, correcting for tax distortions is far from trivial, and the
situation is further complicated by the internationalization of capital markets, which
obscures the relationship between time preferences and interest rates in a particular
country. Lind (forthcoming) argues that given these complications, the only reason-
able way to determine the social rate of time preference is to elicit time preferences at
the individual level. But if individuals do not discount everything at a single rate, then
which rate is the one that is appropriate for social discounting? Suppose that an
individual’s freezer purchase implies a discount rate of 50 percent, but that the same
person is indifferent between saving 10 lives this year and 10 lives in 20 years? How
then should we decide between building another power plant and improving highway
safety?

Many economists view the research on the psychology of decision making as a
nuisance. The research often provides evidence that individuals violate certain as-
sumptions of rational choice without offering alternative assumptions that can easily
be incorporated into economic models. However, psychology can be constructive as
well as destructive. For example, in the case of increasing wage profiles, the psycholo-
gists’ observation that people care about changes in as well as absolute levels of
income and consumption (which should be noncontroversial since economists don’t
argue about tastes) can reconcile the preference for increasing wage profiles with the
standard economic assumption that people discount the future. The advantage of
drawing on empirical research to suggest modifications in the utility function is that
the proposed modifications are less ad hoc. A good example of this kind of reasoning,
is offered by Constantinides (1988) in his paper on the “equity premiumpuzzle” (why
are returns on stocks so much higher than on bonds?). Constantinides bases his
explanation on the assumption that the utility of current consumption depends on past
levels of consumption, or as he calls it, habit formation. A cynic might argue that if
you try enough utility functions, you can explain anything. However, here that
criticism would be misplaced. The habit formation assumption seems to fit intuitions
about behavior, and is consistent with a great deal of empirical research. It is even
testable. Explanations that rely on assumptions that are testable (or even better, true!)
are more attractive than those based on assumptions which are untestable or implausi-
ble, for example those which depend on time-varying changes in the unobservable risk
of economic catastrophe.

* The authors wish to thank without implicating George Ainslie, Colin Camerer, John
Campbell, Werner De Bondt, Jon Elster, William Lang, and Nachum Sicherman for helpful
comments, and Concord Capital Management and the Russell Sage Foundation for financial
support.

Anomalies 193

References

Ainslie, George, “Specious Reward: A Behav-
ioral Theory of Impulsiveness and Impulse Con-
trol,” Psychological Bulletin, 1975, 82, 463-509.

Ainslie, George, Picoeconomics: The Interaction of
Successive Motivational States Within the Individual.
Cambridge: Cambridge University Press, forth-
coming.

Benzion, Uri, Amnon Rapoport, and Joseph
Yagil, “Discount Rates Inferred from Decisions:
An Experimental Study,” Management Science,
March 1989, 35, 270-84.

Constantinides, George, “Habit Formation: A
Resolution of the Equity Premium Puzzle,” un-
published working paper, University of Chicago,
Graduate School of Business, 1988.

Courant, Paul, Edward Gramlich, and John
Laitner, “A Dynamic Micro Estimate of the
Life-Cycle Model.” In Aaron, Henry G., and
Gary Burtless, eds., Retirement and Economic Behav-
ior. Washington D.C.: Brookings Institution, 1986.

Elster, Jon, Ulysses and the Sirens. New York:
Cambridge University Press, 1979.

Frank, Robert, and Robert Hutchens, “Feeling
Better vs. Feeling Good: A Life-Cycle Theory of
Wages,” Quarterly Journal of Economics, forthcom-
ing.

Gately, Dermot, ” Individual Discount Rates
and the Purchase and Utilization of Energy-Using
Durables: Comment,” Bell Journal of Economics,
1980, 11, 373-374.

Hausman, Jerry, “Individual Discount Rates
and the Purchase and Utilization of Energy-Using
Durables,” Bell Journal of Economics, 1979, 10,
33-54.

Herrnstein, Richard J., “Relative and Absolute
Strength of Response as a Function of Frequency
of Reinforcement,” Journal of Experimental Analysis
of Behavior. 1961, 4, 267-272.

Holcomb, John H., and Paul S. Nelson, “An
Experimental Investigation of Individual Time
Preference,” unpublished working paper, 1989.

Horowitz, John K., “Discounting Money Pay-
offs: An Experimental Analysis.” working paper,
Department of Agricultural and Resource Eco-
nomics, University of Maryland, 1988.

Kahneman, Daniel, and Amos Tversky, “Pro-
spect Theory: An Analysis of Decision Under
Risk,” Econometrica, 1979, 47, 363-91.

Lazear, Edward, “Agency, Earnings Profiles,
Productivity, and Hours Restrictions,” American
Economic Review, 1981, 61, 606-620.

Lind, Robert, “Reassessing the Government’s
Discount Rate Policy in Light of New Theory and
Data in a World Economy with a High Degree of

Capital Mobility,” Journal of Environmental Eco-
nomics and Management, forthcoming.

Loewenstein, George, “Anticipation and the
Valuation of Delayed Consumption,” Economic
Journal, 1987, 97, 666-684.

Loewenstein, George, “(Frames of Mind in In-
tertemporal Choice,” Management Science, 1988, 34,
200-214.

Loewenstein, George, and Drazen Prelec,
“Anomalies in Intertemporal Choice: Evidence
and Interpretation,” Russell Sage Foundation
Working Paper, 1989a.

Loewenstein, George, and Drazen Prelec, “De-
cision Making Over Time and Under Uncer-
tainty: A Common Approach,” working paper,
University of Chicago, Center for Decision Re-
search, 1989b.

Loewenstein, George, and Nachum Sicher-
man, “Do Workers Prefer Increasing Wage Pro-
files?” working paper, University of Chicago,
Center for Decision Research, 1989.

Marshall, Alfred, Principles of Economics, 2nd ed.
London: Macmillian, 1891.

Markowitz, Harry, “The Utility of Wealth,”
Joumnal of Political Economy, 1952, 60, 151-58.

Medoff, James L., and Katharine G. Abraham,
“Experience, Performance and Earnings,” Quar-
terly Journal of Fconomics, December 1980, 95,
703-36.

Ruderman, Henry, Mark Levine, and James
McMahon, ” Energy-Efficiency Choice in the Pur-
chase of Residential Appliances.” In Kempton,
Willett, and Max Neiman, eds., Energy Efficiency:
Perspectives on Individual Behavior. Washington D.C.:
American Council for an Energy Efficient Econ-
omy, 1986.

Schelling, Thomas, “Self-Command in Prac-
tice, in Policy, and in a Theory of Rational
Choice,” American Economic Review, 1984, 74, 1 -1 1.

Shefrin, Hersh, and Richard H. Thaler, “The
Behavioral Life-Cycle Hypothesis,” Economic In-
quiry, October 1988, 26, 609-643.

Strotz, Robert H., “Myopia and Inconsistency
in Dyanmic Utility Maximization,” Review of Eco-
nomic Studies, 1956, 23, 165-80.

Thaler, Richard H., “Some Empirical Evi-
dence on Dynamic Inconsistency,” Economics Let-
ters, 1981, 8, 201-207.

Thaler, Richard H., and Hersh M. Shefrin,
“An Economic Theory of Self-Control,” Journal of
Political Economy, 89, 1981, 392-410.

Winston, Gordon, “Addiction and
Backsliding,” Journal of Economic Behavior and Orga-
nization, December 1980, 1, 295-324.

• Article Contents

p. 181
p. 182
p. 183
p. 184
p. 185
p. 186
p. 187
p. 188
p. 189
p. 190
p. 191
p. 192
p. 193

• Issue Table of Contents

The Journal of Economic Perspectives, Vol. 3, No. 4 (Autumn, 1989), pp. 3-218+i-vi
Volume Information [pp. 217 – 218]
Front Matter
Symposia: Federal Deposit Insurance
Symposium on Federal Deposit Insurance for S&L Institutions [pp. 3 – 9]
The Reform of Federal Deposit Insurance [pp. 11 – 29]
The High Cost of Incompletely Funding the FSLIC Shortage of Explicit Capital [pp. 31 – 47]
Symposia: Seniority and Wages
Seniority, Wages and Productivity: A Turbulent Decade [pp. 49 – 64]
Self-Enforcing Contracts, Shirking, and Life Cycle Incentives [pp. 65 – 83]
Symposia: Social Norms
Spontaneous Order [pp. 85 – 97]
Social Norms and Economic Theory [pp. 99 – 117]
The Political Economy of Trade Policy [pp. 119 – 135]
Research on the Economics Profession [pp. 137 – 148]
On the Demise of the Long Run [pp. 149 – 152]
Implications of the U.S. Current Account Deficit [pp. 153 – 165]
An Accountant Among Economists: Conversations with Sir John R. Hicks [pp. 167 – 180]
Anomalies: Intertemporal Choice [pp. 181 – 193]
Retrospectives: Adam Smith’s Invisible Hands [pp. 195 – 201]
Recommendations for Further Reading [pp. 203 – 206]
Correspondence [pp. 207 – 210]
Notes [pp. 211 – 216]
Back Matter [pp. i – vi]

Neuroeconomics

Intertemporal choice – toward an
integrative framework
Gregory S. Berns1, David Laibson2 and George Loewenstein3

1
Department of Psychiatry & Behavioral Sciences, Emory University School of Medicine, Atlanta, GA 30322, USA

2
Department of Economics, Harvard University, Cambridge, MA 02138, USA

3
Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, PA 15213, USA

Review TRENDS in Cognitive Sciences Vol.11 No.11

Intertemporal choices are decisions with consequences
that play out over time. These choices range from the
prosaic – how much food to eat at a meal – to life-
changing decisions about education, marriage, fertility,
health behaviors and savings. Intertemporal preferences
also affect policy debates about long-run challenges,
such as global warming. Historically, it was assumed
that delayed rewards were discounted at a constant rate
over time. Recent theoretical and empirical advances
from economic, psychological and neuroscience
perspectives, however, have revealed a more complex
account of how individuals make intertemporal de-
cisions. We review and integrate these advances. We
emphasize three different, occasionally competing,
mechanisms that are implemented in the brain: repres-
entation, anticipation and self-control.

Economic, psychological and neuroscientific
perspectives on intertemporal choice
Intertemporal choices – decisions with consequences that
play out over time – are important and ubiquitous. De-
cisions about spending, investments, diet, relationships,
fertility, crime and education all contain intertemporal
tradeoffs. In this paper, we discuss interrelated perspect-
ives on intertemporal choice from the fields of economics,
psychology and neuroscience.

Until recently, the main contribution of economics to the
study of intertemporal decisions was modeling. For nearly
80 years, economists have analyzed intertemporal de-
cisions using the discounted utility (DU) model, which
assumes that people evaluate the pleasures and pains
resulting from a decision in much the same way that
financial markets evaluate losses and gains, exponentially
‘discounting’ the value of outcomes according to how
delayed they are in time. DU has been used to describe
how people actually make intertemporal choices and it has
been used as a tool for public policy. Policy decisions about
how much to spend on research and development, health
and education all depend on the discount rate used to
analyze the decision. Indeed, recently the discount rate
has proven to be a key parameter in the policy debate about
global warming [1].

Corresponding authors: Berns, G.S. (gberns@emory.edu);
Laibson, D. (dlaibson@harvard.edu); Loewenstein, G. (gl20@andrew.cmu.edu).

Available online 5 November 2007.

www.sciencedirect.com

1364-6613/$ – see front matter � 2007 Elsevier Ltd. All rights reserve

The main contribution of psychology has been to
identify, through empirical research, psychological mech-
anisms underlying intertemporal choice. For example,
George Ainslie’s research on the structure of time discount-
ing posed the first serious challenge to the DU model –
specifically to the assumption that people discount the
future exponentially [2,3]. The concept of ‘hyperbolic time
discounting’ (explained below) can be considered the first
observed pattern of behavior that is inconsistent with
DU – a DU ‘anomaly’. Subsequent research by both psy-
chologists and economists has identified a wide range of
additional anomalies [4–12]. Economists have responded
to these findings by constructing new models of intertem-
poral choice, which incorporate psychological insights,
to explain otherwise anomalous patterns of economic beha-
vior [13].

Neuroscience is the most recent entrant into what was
already a rich interdisciplinary mix of research. Although
still in its infancy, neuroscience research on intertemporal
choice has led to an enhanced understanding of how inter-
temporal choices might be implemented in the brain [14–
17], and, as we document, has already begun to inform
economic modeling and to provide new clues about pro-
ductive empirical and theoretical avenues for future
research.

Time discounting
The great strengths of the DU model are its simplicity and
generality. DU is easy to apply mathematically to any kind
of intertemporal choice. According to DU, intertemporal
choices are no different from any other type of choices
except that some consequences are delayed, and hence
must be anticipated and discounted (i.e. reweighted to take
account of delay). Much of the research on intertemporal
choice has, therefore, focused on the degree to which people
anticipate and discount future events.

Numerous experiments in animals, notably rats and
pigeons, have shown that under operant conditioning para-
digms, the effectiveness of a reinforcer diminishes the
further in time it is delayed [18]. In pigeons, for instance,
the reinforcement value of three units of reward available
in 11 s is approximately equal to the reinforcement value
of eight units of reward available after 20 s [19]. The
traditional model of intertemporal choice uses ‘exponential
discounting’, in which a reward of magnitude x occurring at

d. doi:10.1016/j.tics.2007.08.011

mailto:gberns@emory.edu

mailto:dlaibson@harvard.edu

mailto:gl20@andrew.cmu.edu

http://dx.doi.org/10.1016/j.tics.2007.08.011

Figure 1. Discount functions. Exponential discounting assumes a constant rate of

discounting, e.g. d
t

where d is the discount rate (here, d = 0.95). Hyperbolic

discounting is generally greater for short time periods than long periods, and can

be described by a function of the form 1/(K * t + 1). Here, K = 0.1. Quasi-hyperbolic

discounting is a piecewise function that follows a form similar to exponential

discounting after the first discount period (i.e. the first year): 1, b�d, b�d2, . . ., b�dt.
(Here, b = 0.792 and d = 0.96.)

Review TRENDS in Cognitive Sciences Vol.11 No.11 483

some time t in the future is worth dtx, where d � 1 is a fixed
constant (the discount factor). In other words, the value of
the reward decays by the same proportion for each minute
that its occurrence is delayed. Figure 1 plots three different
discount functions, including an exponential function with
d = 0.95.

However, the bulk of the evidence (primarily from rats
and pigeons) suggests that animals discount the future in a
non-exponential manner. The most commonly described
discounting behavior is hyperbolic, which means that
delayed rewards are discounted by functions that are
inversely proportional to delay – for example, 1/t or gener-
alizations thereof [18–21]. Hyperboloid discount functions
decay at a more rapid rate in the short run than in the long
run, so a hyperbolic discounter is more impatient when
making short-run tradeoffs than when making long-run
tradeoffs. Figure 1 also plots a hyperboloid [7] and a ‘quasi-
hyperbolic’ discount function (Box 1) [13,22].

Humans also have been shown to discount the future
hyperbolically [7,20], and many commentators have
implicitly or explicitly drawn connections between the
patterns of choice displayed by animals and by humans.
However, whether the parallel between animals and
humans is a matter of analogy or homology is unclear.
Most humans care about, or at least are capable of caring
about, costs and benefits that extend years or even decades.
By contrast, our nearest evolutionary relatives have
measured discount functions that fall in value nearly to
zero after a delay of about one minute. For example,
Stevens et al. report that cotton-top tamarin monkeys
are unable to wait more than eight seconds to triple the
value of an immediately available food reward [23].

Some researchers have speculated that the difference
between humans and other animals lies in our ability to
form a mental image of, and care about, delayed outcomes
[24], and there is widespread agreement that the prefron-

www.sciencedirect.com

tal cortex, which is disproportionately large in humans
relative to other species, has an important role in this
capability. The first clues about the function of the pre-
frontal cortex came from people who experienced damage
to it, either through accident, stroke or frontal lobotomy
[24–26]. Studies have traced the development of self-con-
trol capabilities in children to the maturation of prefrontal
areas [27], and still other studies have connected criminal-
ity and violent out-of-control behaviors to childhood injury
to prefrontal regions [28,29]. Humans undoubtedly share
with other animals the mechanisms that produce rapid
hyperbolic time discounting, but we also have the capacity,
seemingly enabled by the prefrontal cortex, to make de-
cisions that take account of a much longer span of time.

All of these pieces of evidence, as well as the common
observance in humans of extremes in apparent regard (or
disregard) for the future, have led to a perspective that is
both new and old. According to this perspective, time
discounting in humans results from the interaction of
two systems, one which is capable of anticipating and
caring about the distant future, and the other which is
much more oriented toward the present. Empirical support
for such a perspective comes from a recent study in which
subjects’ brains were scanned while they made choices
between smaller money amounts that could be received
earlier and large amounts that could be received later [14].
Some of the choices were between an immediate and a
delayed payment, and others were between delayed and
even more delayed payments. The researchers found that
prefrontal regions were involved in all intertemporal
choices (relative to rest) but that the mesolimbic dopamine
system and associated regions were involved only in
choices with an immediate outcome. Moreover, when
immediate payment was one of the options, the relative
activation of the two regions (prefrontal or dopamine) was
a significant predictor of choice. This research lends sup-
port to the idea that hyperbolic time discounting results
from the splicing of two systems with different perspectives
toward the future, and that the prefrontal cortex has an
especially important role in implementing more patient
preferences. However, it does not provide definitive evi-
dence of causal relationships, because the data are purely
correlational.

Other dimensions of intertemporal choice
Time discounting might be the most frequently studied
aspect of intertemporal choice, but it is only one of several
dimensions that come into play. In this section, we discuss
three other mechanisms that, prior research suggests,
have an especially important role in intertemporal choice:
‘anticipation’, ‘self-control’ and ‘representation’. Anticip-
ation refers to an individual’s propensity to imagine, and
experience pleasure and pain in anticipation of, a future
event. Self-control refers to the tensions that people experi-
ence when they attempt to implement a far-sighted
decision in the presence of immediate temptation. Repres-
entation refers to the way that the brain interprets or
frames a set of choices. Representation often happens first
in a decision time-line, but we discuss representation last
because less is known about this component of intertem-
poral decision making. Although these mechanisms, in

Box 1. Modeling preference reversals

Standard economic theory assumes that individuals (agents) have

preferences that are stable through time. In this context a preference

refers to a rank ordering of outcomes, or choices, that an individual

makes. For example, a person might be said to prefer tea over coffee.

However, actions speak louder than words and simply professing

such a preference is no guarantee that, given a choice, such an

individual would actually choose tea. Because of the hidden nature of

preferences, eliciting choices (e.g. through forced-choice or will-

ingness-to-pay) is the only reliable way to measure preferences. Even

so, individuals often exhibit reversals in their apparent preferences

when it comes to delayed outcomes. Dieting, for example, often falls

into this trap of preference reversals. An individual makes a New

Year’s resolution to lose weight (a temporally remote outcome), but

when confronted with the deliciousness of food, changes his mind (a

temporally immediate outcome). Such preference reversals can be

modeled in terms of a non-exponential discount function. Assume

that an economic agent has a quasi-hyperbolic discount function: 1,

b�d, b�d2, b�d3, . . .. (Figure 1). In general, this discount function is
parameterized with 0 < b < 1 and 0 < d < 1, but to simplify the illustrative example, set b = 1/2 and d = 1, so the discount function takes the form 1, 1/2, 1/2, 1/2, . . .., Immediate payoffs have a weight of

one and all future payoffs have a weight of 1/2. Assume that an

investment activity has an immediate cost of four and a delayed

benefit of six. When the investment opportunity is distant in time, the

agent plans to undertake the investment because 1/2(�4) + 1/2(6) = 1.
However, when the moment of action arises, the agent changes her

mind because 1(�4) + 1/2(6) = �1.
If agents anticipate such preference reversals [57], they might find

ways to commit themselves in advance – for instance, scheduling an

appointment to exercise with a trainer or putting their saving into

illiquid accounts [13]. If agents fail to anticipate their preference

reversals, they might engage in patently self-defeating behaviors,

such as perpetually paying monthly dues at a gym that they never

attend [54] or, more generally, procrastinating [58,59].

The predictions of the basic hyperbolic discounting model have

been experimentally and empirically validated [20,60]. But the basic

hyperbolic discount function provides only a partial account of

intertemporal preferences [6]. Most importantly, temporal immediacy

of rewards is only one of many factors that seem to produce

impulsivity. Other factors include sensory proximity – the sight,

sound, smell or touch of a desired reward – and the activation of drive

states, such as hunger, thirst or sexual arousal. Thus, for example,

mild opioid deprivation in a population of heroin-addicted outpatients

produces greater discounting of monetary rewards [61]. Likewise,

nicotine deprivation among smokers also produces greater monetary

discounting [62,63]. People often lose control in the ‘heat of the

moment’ or when willpower is depleted [64].

Although preference reversals are often attributed to hyperbolic

time discounting, they can also result from other mechanisms (which

themselves, in some cases, can help to explain hyperbolic time

discounting). Three (overlapping) categories of mechanisms are

visceral influences, cue-contingent influences and temptation prefer-

ences.

Visceral influences are associated with emotion and affect, and are

directly related to changes in drive state. Visceral preferences are

generated by immediate biological imperatives – for instance, thirst,

hunger, sexual arousal, exhaustion, pain, the need to physically

dominate an opponent, or fear for physical safety. Loewenstein has

argued that visceral needs often overwhelm other goals and produce

short-sighted behavior [65]. This assumption has also been adopted

in a two-state decision-making model [66]. In the cold state, the

decision-maker is guided by forward-looking rational deliberations. In

the hot state, the decision-maker is completely controlled by her

myopic visceral needs. Hence, highly impatient behavior would be

associated with time periods in which the visceral preferences are

dominant, explaining many addictive behaviors, including excess use

of an addictive substance and relapse after detoxification.

Cue-contingent preferences have been studied since Pavlov’s

feeding experiments [67]. Cue-contingent preferences are formed

when a neutral stimulus is repeatedly paired with a non-neutral

stimulus, such as a consumption event. The end result is a change in

drive state, even though the eliciting stimulus was, at one point,

neutral. For instance, a heroin user might come to associate the visual

stimuli of a certain environment with ingestion of heroin. Such

pairings might be strong enough to elicit cue-contingent drug

cravings and cue-contingent tolerance, so that the user’s desire to

take heroin becomes much stronger when the cues are present [68].

Cue-contingent cravings might produce preference reversals, transi-

tory efforts to achieve immediate gratification, and forward-looking

efforts to modify cue exposure [65,66,69]. Indeed, several brain-

imaging experiments have demonstrated the powerful effect of

showing pictures of drug-related paraphernalia to people who are

addicted to these substances [70–75]. Although craving, in and of

itself, does not represent a breakdown in self-control, it does

represent an emotional state that places the individual at risk for a

preference reversal. The biological substrates of craving, however,

are complex and recruit a wide range of circuits in the brain that

include memory regions such as the hippocampus, executive control

regions in the prefrontal cortex, and visceral regions such as the

insula. However, no single brain region has been demonstrated to be

singularly responsible for self-control. Instead, multiple systems

process different psychological dimensions of competing prefer-

ences.

Temptation preferences arise in two-system models and are

another way of describing the temporal immediacy effect of rewards

by invoking the cost of self-control [66,76–78]. Rather than postulating

a non-exponential discount function, temptation preferences are

typically modeled as a drive for immediate gratification, which can

be cognitively overridden with some utility cost generated by mental

effort (self-control). In the models cited here, the cost is associated

with the degree to which the impatient preference is violated. The end

result, however, is the same as a non-exponential discount function.

For example, imagine that an agent has a craving to eat a (full) bowl of

ice cream sitting in front of him, but allows himself to eat only some

fraction of that bowl. Temptation models assume that the cost of

temptation is falling in the amount that the agent eats. If the agent

eats nothing, then temptation costs are maximal. If the agent eats the

whole bowl, then temptation costs are zero. Temptation preferences

are one way of formally modeling the interaction between the patient

(cortical) system and the impatient (mesolimbic dopamine reward

related) system. Little is known about the nature of the interaction of

these two putative systems, but one brain region, the anterior

cingulate cortex (ACC), is thought to have a role in mediating the

conflict between competing actions [79,80]. The exertion of self-

control requires the suppression of either cravings or temptations,

which are the types of competing responses that the ACC modulates.

Another region, the inferior prefrontal cortex, seems to be involved in

achieving self-control by inhibiting one of these responses [81].

Importantly, how the ACC processes these conflicts and how the

inferior prefrontal cortex inhibits one or another depends on the

context in which these temptations occur, which leads to the third

aspect of intertemporal choice: representation.

484 Review TRENDS in Cognitive Sciences Vol.11 No.11

some situations, come into competition with time discount-
ing, in other situations they contribute to it. Indeed, as
touched upon above, there is some question of whether
these are the mechanisms underlying time discounting.

Anticipation

The classical economic model of intertemporal choice
assumes that choices have no utility consequences other

www.sciencedirect.com

than the consumption events that result from those
choices. For example, the pleasure of a decadent meal is
assumed to arise from the meal itself and not the aware-
ness, before the event, that it will take place. In practice,
however, when a plan is made in advance – for instance a
dinner reservation – there is a waiting period during which
the future outcome is anticipated. Moreover, this period of
anticipation might have its own affective consequences for

Review TRENDS in Cognitive Sciences Vol.11 No.11 485

the actor. The period between decision and outcome has
received relatively little consideration from economic
researchers because economic models typically do not treat
purely mental events as intrinsic sources of utility [30].

From a behavioral perspective, however, both animals
and humans experience subjective changes in mental state
associated with this continuous period of anticipation.
When rats are conditioned to associate a neutral stimulus
with a noxious outcome (a loud noise), they enter a state of
physiological arousal between the stimulus and outcome.
The degree of arousal is associated with their tendency to
‘startle’ in response to the noise. Hence, the startle
response serves as a measure of the degree of learning
that has occurred [31,32]. Humans display similar states of
arousal, which can be indexed by the galvanic skin con-
ductance response (GSR) [33]. When the anticipation
period is extended, the arousal level can assume complex
forms, including an initial surprise effect when the indi-
vidual first becomes aware of the impending outcome and a
ramp-up to the time when the outcome is expected to occur
[34,35].

The anticipation of an outcome can lead to physiological
arousal, but does this state of anticipation enter into the
decision-making process? Under certain circumstances it
does. Consideration of the anticipation of a particularly
pleasurable event, such as the promise of a kiss from a
movie star, or the dread of something painful, such as an
electric shock, often enters into the decisions that people
make; for example, causing them to get unpleasant out-
comes over with quickly to eliminate what otherwise would
be an aversive period of waiting [36,37], behavior that is
contrary to the most basic prediction of the DU model,
assuming that people discount the future. A concise expla-
nation of this phenomenon is that anticipation can confer
utility (or disutility) in, and of, itself. Human neuroimaging
data demonstrate that activity in regions associated with
the experience of pain increases in anticipation of delayed
painful stimuli [38–44], and the degree of this anticipatory
activity correlates with the degree to which an individual
chooses to expedite unpleasant outcomes [36].

Anticipatory responses to appetitive stimuli are also
common in neural systems, although these tend to be in
different regions than for aversive stimuli. Anticipatory
activity in the ventral striatum and orbitofrontal cortex
has been associated with the prospect of receiving a finan-
cial windfall [45–47], beautiful faces [48] and pleasant-
tasting drinks [49–51]. Because of the relatively short
interval between the cue and the outcome in these exper-
iments, it is difficult to ascertain whether the activity is in
response to the initial cue or the waiting period.

Self-control

It is often difficult to wait for a delayed reward when
an immediately gratifying alternative is available. For
instance, quitting smoking is difficult because cigarettes
are available at every news-stand and drug store. Situ-
ations such as this can lead to ‘preference reversals’,
wherein people initially decide to take a far-sighted course
of action – quitting smoking – but subsequently succumb to
temptation [20]. Preference reversals are observable
phenomena that point to the weaknesses of standard

www.sciencedirect.com

DU theory, and they occur in a wide variety of circum-
stances. Although it is possible, as we shall see, to modify
the discount function in a way that explains preference
reversals, the core mechanism might be generated by
phenomena other than the discount function.

Successful implementation of a far-sighted plan of beha-
vior, such as ending a bad habit, thus involves at least two
distinct components. First, the individual needs to make
an initial far-sighted decision, which is likely to depend on
the ability to anticipate future consequences. Second, she
needs to resist short-run temptations, which will under-
mine her ability to implement that decision. Any successful
model of intertemporal choice should incorporate features
that accurately describe the tug of war between long-run
(‘virtuous’) intentions and short-run temptations.

As a benchmark, the DU model fails this descriptive
challenge. As Samuelson [52] noted, the DU model (with
exponential discounting) implies that resolutions once
made are never broken. Economists refer to this property
as dynamic consistency. Anyone who follows the exponen-
tial discounting model will be dynamically consistent –
they will never change their state-contingent preferences.
Plans or preferences made for the future will be the same
as decisions executed at the moment of action. In this
framework, resolutions to quit smoking or stick to a diet
are always carried out (unless new decision-relevant infor-
mation arrives).

Real people don’t have such exquisite self-command
[20,53]. Most people experience preference reversals: plans
made at one date are broken at some later date. For
instance, estimates of relapse rates exceed 50% during
the first year after quitting smoking. Many other types
of behavior illustrate this tendency to backslide, including
credit card spending, exercise and nutrition [54–56].
Beginning with the groundbreaking work of Ainslie
[2,20], these types of effects have been integrated into
models of time discounting.

The exponential discounting model counterfactually
rules out preference reversals. However, any other dis-
counting behavior has the potential to generate preference
reversals, which economists refer to as dynamic inconsis-
tency. This potential was first discussed by Samuelson [52]
and then developed by others [22,57]. Most research has
focused on the class of hyperbolic [2,7] and quasi-hyper-
bolic discount functions [13], which predict that agents will
make patient plans and then break them at the moment of
execution (Box 1).

Representation

Economic analysis assumes that how a choice is
represented is an objective matter. But, in fact, it is
possible to mentally represent the same situation in a
variety of different ways [82]. People use a wide range of
choice heuristics to make the decisions they face and which
heuristics come into play depends crucially on how they
construe these decisions [83,84]. As a result, differences in
context or in the way that a decision is ‘framed’ or cogni-
tively construed can have an impact on the intertemporal
tradeoffs that people make.

A child’s ability to delay gratification depends on the
manner in which the child is instructed to mentally

Box 2. Directions for future research

How can neurobiological data be used to develop and test models of

intertemporal choice? In the past, the tautology of choice and

preference has excluded analysis of neurobiological mechanisms. In

recent years, a growing body of data based on brain imaging is

enabling researchers to link intertemporal decisions to neural

activation patterns, producing both new empirical regularities and

new controversies [14,90,91]. The challenge will be to marry

neurobiological descriptions with theoretical ones.

Can a single model account for the large range of timescales over

which intertemporal choices are made? Such choices range from

intervals of milliseconds to decades. Is there a unifying framework

for all such intertemporal choices or do different mechanisms apply

at different timescales?

How does the representation of time itself influence intertemporal

choice? The representation of time is typically assessed in a

retrospective manner (i.e. how much time has passed). Intertem-

poral choices are fundamentally prospective. How does the

representation of the past affect the representation of the future?

486 Review TRENDS in Cognitive Sciences Vol.11 No.11

represent a reward [9,85]. When given a choice between an
immediate single pretzel or two delayed pretzels, children
were more likely to wait if instructed to represent the
pretzel in pallid or unappealing terms – for instance, as
‘little brown logs’ – than if they were to represent the
pretzel in consumatory terms – ‘yummy, tasty’. In research
with adults, Wilson and Daly [86] found that showing male
subjects photographs of attractive females raises the male
subjects’ monetary discount rates. Wilson and Daly’s
results show that reproductively salient stimuli change
the way that individuals evaluate time-dated monetary
rewards, possibly by creating a general sense of urgency
or by generating emotional arousal, which increases
the relative strength of the impatient affective reward
systems.

A variety of studies have shown that framing an inter-
temporal choice in a fashion that draws more attention to
the need to wait during the delay interval tends to produce
steeper time discounting – less willingness to delay. For
example, subjects are much less willing to delay gratifica-
tion when they made a choice that was expressed in terms
of delay than when the same choice was expressed in terms
of speed-up or simply as a choice between outcomes at
two different points in time [37]. More recently, several
studies have shown that people tend to display flatter
time discounting when the delay interval of an intertem-
poral choice is presented in terms of dates – for example,
x today or y on a particular date – than when expressed in
terms of a delay interval – for example, x today or y after a
wait of z days (where the interval in the two choices is
equal) [87].

Given the complexities of many decisions, people often
simplify the process of decision making by drawing from a
toolbox of different choice heuristics – simple rules of choice
that dictate what to do in a particular situation [83].
Examples of choice heuristics might include ‘pick what
the last person picked’ or ‘pick what you picked last time
(unless it turned out bad)’. If the representation of the
choice affects the selection of choice heuristics, then repres-
entation will have an impact on decision making.

One important choice heuristic that people seem to
employ is to choose sequences of outcomes that improve
over time – a pattern of choice that effectively results in
‘negative time preference’: subjects prefer to have the
smaller rewards early and the larger rewards later, con-
trary to what the DU model would predict. However,
whether a particular intertemporal choice is represented
as a sequence, and hence whether this heuristic is applied,
can depend on relatively subtle factors. In the first demon-
stration of this point, Prelec and Loewenstein [88] asked
some subjects to hypothetically choose whether to consume
a fancy French dinner on the following weekend or on a
weekend one month later. Most subjects chose to have the
French dinner on the earlier date. However, when the
decision was represented as a sequence of two events on
fixed dates, where subjects could choose to eat at home on
one weekend and eat the fancy dinner on the other, a
majority of subjects now chose to delay the fancy French
dinner to the later date. Later research found that the more
coherent a sequence was made to seem, the more probable
subjects were to opt for improving sequences [89].

www.sciencedirect.com

Conclusion
The research reviewed above identifies three operations
that affect intertemporal choice. Anticipation produces
immediate hedonic consequences, even when the anticip-
ated consumption event is delayed in time. Self-control is
used to resist temptations to reverse patient plans. Repres-
entations evoke specific choice heuristics that increase or
decrease the salience of delayed rewards and make waiting
more or less aversive. Any comprehensive account of inter-
temporal choice should incorporate all of these mechan-
isms. At the moment, we know little about how these
mechanisms interact, which should be a priority for future
research. At the most general level, it is important to
determine whether the brain has one all-purpose time
discounting mechanism or whether the brain draws upon
different systems, each with its own occasionally compet-
ing time perspective.

Although the new models of intertemporal choice are
more realistic than the DU model they are intended to
replace, the increased realism has come at the expense of
simplicity. Researchers face a familiar conflict between
parsimony and realism. We hope that the interactions
among economists, psychologists and neuroscientists will
identify basic neural mechanisms that explain a wide
range of empirical regularities. We believe that models
with multiple interacting/competing neural mechanisms
represent the most promising research frontier (Box 2).
Such models are characterized by at least two classes of
neural systems – patient systems that implement cool,
analytic preferences and impatient systems that imple-
ment hot, affective preferences.

Acknowledgements
We would like to gratefully acknowledge discussions of these issues with
Jonathan Cohen, Keith Ericson and Sam McClure, the input of our editor
and three anonymous referees, and the support of the National Institute
on Drug Abuse (R01 DA016434 and R01 DA20116 to G.S.B.) and the
National Institute on Aging (P30 AG012810 and P01 AG005842. to D.L.).

References
1 Dasgupta, P. (2006) Comments on the Stern Review’s Economics of

Climate Change, Cambridge University Press
2 Ainslie, G. (1975) Specious reward: a behavioral theory of

impulsiveness. Psychol. Bull. 82, 463–496

Review TRENDS in Cognitive Sciences Vol.11 No.11 487

3 Rachlin, H. and Green, L. (1972) Commitment, choice and self-control.
J. Exp. Anal. Behav. 17, 15–22

4 Green, L. et al. (1981) Preference reversal and self-control: choice as a
function of reward amount and delay. Behav. Anal. Lett. 1, 43–51

5 Green, L. et al. (1997) Rate of temporal discounting decreases with
amount of reward. Mem. Cognit. 25, 715–723

6 Frederick, S. et al. (2002) Time discounting and time preference: a
critical review. J. Econ. Lit. 40, 351–401

7 Loewenstein, G. and Prelec, D. (1992) Anomalies in intertemporal
choice: evidence and an interpretation. Q. J. Econ. 107, 573–597

8 Loewenstein, G. and Thaler, R. (1989) Anomalies: intertemporal
choice. J. Econ. Perspect. 3, 181–193

9 Metcalfe, J. and Mischel, W. (1999) A hot/cool-system analysis of delay
of gratification: dynamics of willpower. Psychol. Rev. 106, 3–19

10 Mischel, W. et al. (1989) Delay of gratification in children. Science 244,
933–938

11 Rachlin, H. (2000) The Science of Self-Control, Harvard University
Press

12 Thaler, R.H. (1981) Some empirical evidence on dynamic inconsistency.
Econ. Lett. 8, 201–207

13 Laibson, D.I. (1997) Golden eggs and hyperbolic discounting. Q. J.
Econ. 62, 443–477

14 McClure, S.M. et al. (2004) Separate neural systems value immediate
and delayed monetary rewards. Science 306, 503–507

15 Montague, P.R. and Berns, G.S. (2002) Neural economics and the
biological substrates of valuation. Neuron 36, 265–284

16 Montague, P.R. et al. (2006) Imaging valuation models in human
choice. Annu. Rev. Neurosci. 29, 417–448

17 Schultz, W. (2006) Behavioral theories and the neurophysiology of
reward. Annu. Rev. Psychol. 57, 87–115

18 Herrnstein, R.J. (1961) Relative and absolute strength of response as a
function of frequency of reinforcement. J. Exp. Anal. Behav. 4, 267–272

19 Mazur, J.E. (1988) Estimation of indifference points with an adjusting-
delay procedure. J. Exp. Anal. Behav. 49, 37–47

20 Ainslie, G. (1992) Picoeconomics: The Strategic Interaction of
Successive Motivational States Within the Person, Cambridge
University Press

21 Chung, S-H. and Herrnstein, R.J. (1967) Choice and delay of
reinforcement. J. Exp. Anal. Behav. 10, 67–74

22 Phelps, E.S. and Pollak, R.A. (1968) On second-best national saving
and game-equilibrium growth. Rev. Econ. Stud. 35, 185–199

23 Stevens, J.R. et al. (2005) The ecology and evolution of patience in two
New World monkeys. Biol. Lett. 1, 223–226

24 Cottle, T.J. and Klineberg, S.L. (1974) The Present of Things Future:
Explorations of Time in Human Experience, Free Press

25 Damasio, A.R. (1994) Descartes’ Error: Emotion, Reason, and the
Human Brain, G.P. Putnam

26 Lhermitte, F. (1986) Human autonomy and the frontal lobes. 2. Patient
behavior in complex and social situations — the environmental
dependency syndrome. Ann. Neurol. 19, 335–343

27 Durston, S. et al. (2002) A neural basis for the development of
inhibitory control. Dev. Sci. 5, F9–F16

28 Raine, A. et al. (1997) Brain abnormalities in murderers indicated by
positron emission tomography. Biol. Psychiatry 42, 495–508

29 Yang, Y. et al. (2005) Volume reduction in prefrontal gray matter in
unsuccessful criminal psychopaths. Biol. Psychiatry 57, 1103–1108

30 Loewenstein, G. (2006) Pleasures and pains of information. Science
312, 704–706

31 Gewirtz, J.C. and Davis, M. (2000) Using Pavlovian higher-order
conditioning paradigms to investigate the neural substrates of
emotional learning and memory. Learn. Mem. 7, 257–266

32 Lang, P.J. et al. (2000) Fear and anxiety: animal models and human
cognitive psychophysiology. J. Affect. Disord. 61, 137–159

33 Fredrikson, M. and Ohman, A. (1979) Cardiovascular and
electrodermal responses conditioned to fear-relevant stimuli.
Psychophysiology 16, 1–7

34 Ohman, A. (1974) Orienting reactions, expectancy learning, and
conditioned responses in electrodermal conditioning with different
interstimulus intervals. Biol. Psychol. 1, 189–200

35 Björkstrand, P.A. (1975) Electrodermal responses, subject control and
delay of aversive stimulation. Biol. Psychol. 3, 113–120

36 Berns, G.S. et al. (2006) Neurobiological substrates of dread. Science
312, 754–758

www.sciencedirect.com

37 Loewenstein, G. (1987) Anticipation and the valuation of delayed
consumption. Econ. J. 97, 666–684

38 Ploghaus, A. et al. (1999) Dissociating pain from its anticipation in the
human brain. Science 284, 1979–1981

39 Ploghaus, A. et al. (2000) Learning about pain: the neural substrate of
the prediction error for aversive events. Proc. Natl. Acad. Sci. U. S. A.
97, 9281–9286

40 Porro, C.A. et al. (2002) Does anticipation of pain affect cortical
nociceptive systems? J. Neurosci. 22, 3206–3214

41 Ploghaus, A. et al. (2003) Neural circuitry underlying pain modulation:
expectation, hypnosis, placebo. Trends Cogn. Sci. 7, 197–200

42 Salomons, T.V. et al. (2004) Perceived controllability modulates the
neural response to pain. J. Neurosci. 24, 7199–7203

43 Wager, T.D. et al. (2004) Placebo-induced changes in fMRI in the
anticipation and experience of pain. Science 303, 1162–1167

44 Koyama, T. et al. (2005) The subjective experience of pain: where
expectations become reality. Proc. Natl. Acad. Sci. U. S. A. 102,
12950–12955

45 Breiter, H.C. et al. (2001) Functional imaging of neural responses to
expectancy and experience of monetary gains and losses. Neuron 30,
619–639

46 Delgado, M.R. et al. (2000) Tracking the hemodynamic responses
to reward and punishment in the striatum. J. Neurophysiol. 84,
3072–3077

47 Knutson, B. et al. (2001) Anticipation of increasing monetary reward
selectively recruits nucleus accumbens. J. Neurosci. 21, RC159

48 Aharon, I. et al. (2001) Beautiful faces have variable reward value:
fMRI and behavioral evidence. Neuron 32, 537–551

49 Berns, G.S. et al. (2001) Predictability modulates human brain
response to reward. J. Neurosci. 21, 2793–2798

50 Pagnoni, G. et al. (2002) Activity in human ventral striatum locked to
errors of reward prediction. Nat. Neurosci. 5, 97–98

51 McClure, S.M. et al. (2003) Temporal prediction errors in a passive
learning task activate human striatum. Neuron 38, 339–346

52 Samuelson, P.A. (1937) A note on measurement of utility. Rev. Econ.
Stud. 4, 155–161

53 Schelling, T.C. (1984) Choice and Consequence, Harvard University
Press

54 Della Vigna, S. and Malmendier, U. (2006) Paying not to go to the gym.
Am. Econ. Rev. 96, 694–719

55 Shui, H. and Ausubel, L.M. (2004) Time Inconsistency in the Credit
Card Market, Mimeo

56 Read, D. and van Leeuwen, B. (1998) Predicting hunger: the effects of
appetite and delay on choice. Organ. Behav. Hum. Decis. Process. 76,
189–205

57 Strotz, R.H. (1956) Myopia and inconsistency in dynamic utility
maximization. Rev. Econ. Stud. 23, 165–180

58 Akerlof, G.A. (1991) Procrastination and obedience. Am. Econ. Rev. 81,
1–19

59 O’Donoghue, T. and Rabin, M. (1999) Doing it now or later. Am. Econ.
Rev. 89, 103–124

60 Angeletos, G-M. et al. (2001) The hyperbolic consumption model:
calibration, simulation, and empirical evaluation. J. Econ. Perspect.
15, 47–68

61 Giordano, L.A. et al. (2002) Mild opioid deprivation increases the
degree that opioid-dependent outpatients discount delayed heroin
and money. Psychopharmacology (Berl.) 163, 174–182

62 Mitchell, S.H. (2004) Effects of short-term nicotine deprivation on
decision-making: delay, uncertainty and effort discounting. Nicotine
Tob. Res. 6, 819–828

63 Field, M. et al. (2006) Delay discounting and the behavioural economics
of cigarette purchases in smokers: the effects of nicotine deprivation.
Psychopharmacology (Berl.) 186, 255–263

64 Baumeister, R.F. and Heatherton, T.F. (1996) Self-regulation failure:
an overview. Psychol. Inq. 7, 1–15

65 Loewenstein, G. (1996) Out of control: visceral influences on behavior.
Organ. Behav. Hum. Decis. Process. 65, 272–292

66 Bernheim, B.D. and Rangel, A. (2004) Addiction and cue-triggered
decision processes. Am. Econ. Rev. 94, 1558–1590

67 Pavlov, I.P. (1927) Conditioned Reflexes, Oxford University Press
68 Siegel, S. (1979) The role of conditioning in drug tolerance and

addiction. In Psychopathology in Animals: Research and Treatment
Implications (Keehn, J.D., ed.), pp. 143–168, Academic Press

488 Review TRENDS in Cognitive Sciences Vol.11 No.11

69 Laibson, D.I. (2001) A cue-theory of consumption. Q. J. Econ. 66, 81–120
70 Bonson, K.R. et al. (2002) Neural systems and cue-induced cocaine

craving. Neuropsychopharmacology 26, 376–386
71 Brody, A.L. et al. (2002) Brain metabolic changes during cigarette

craving. Arch. Gen. Psychiatry 59, 1162–1172
72 Garavan, H. et al. (2000) Cue-induced cocaine craving:

neuroanatomical specificity for drug users and drug stimuli. Am. J.
Psychiatry 157, 1789–1798

73 George, M.S. et al. (2001) Activation of prefrontal cortex and anterior
thalamus in alcoholic subjects on exposure to alcohol-specific cues.
Arch. Gen. Psychiatry 58, 345–352

74 Grant, S. et al. (1996) Activation of memory circuits during cue-elicited
cocaine craving. Proc. Natl. Acad. Sci. U. S. A. 93, 12040–12045

75 Kilts, C.D. et al. (2001) Neural activity related to drug craving in
cocaine addiction. Arch. Gen. Psychiatry 58, 334–341

76 Fudenberg, D. and Levine, D. (2006) A dual self model of impulse
control. Am. Econ. Rev. 96, 1449–1476

77 Thaler, R.H. and Shefrin, H.M. (1981) An economic theory of self-
control. J. Polit. Econ. 89, 392–406

78 Gul, F. and Pesendorfer, W. (2001) Temptation and self-control.
Econometrica 69, 1403–1435

79 Carter, C.S. et al. (1998) Anterior cingulate cortex, error detection and
the on-line monitoring of performance. Science 280, 747–749

80 Botvinick, M.M. et al. (2001) Conflict monitoring and cognitive control.
Psychol. Rev. 108, 624–652

Elsevier joins major healt

Elsevier has joined with scientific publishers and le

patientINFORM, a groundbreaking initiative to help p

gap. patientINFORM is a free online service de

Elsevier provides voluntary health organizations wi

biomedical journals immediately upon publication

voluntary health organizations integrate the informat

text of selected research ar

patientINFORM has been created to enable patients

options online access to the most up-to-date, rel

For more information, visit

www.sciencedirect.com

81 Aron, A.R. et al. (2004) Inhibition and the right inferior frontal cortex.
Trends Cogn. Sci. 8, 170–177

82 Kahneman, D. et al. (1982) Judgment under Uncertainty: Heuristics
and Biases, Cambridge University Press

83 Gigerenzer, G. and Todd, P.M. (1999) Simple Heuristics that Make us
Smart, Oxford University Press

84 Gilovich, T. et al. (2002) Heuristics and Biases: The Psychology of
Intuitive Judgment, Cambridge University Press

85 Mischel, W. and Underwood, B. (1974) Instrumental ideation in delay
of gratification. Child Dev. 45, 1083–1088

86 Wilson, M. and Daly, M. (2004) Do pretty women inspire men to
discount the future? Proc. R. Soc. Lond. B. Biol. Sci. 271
(Supplement), 177–179

87 Read, D. et al. (2005) Four score and seven years from now: the
‘‘date/delay effect’’ in temporal discounting. Manage. Sci. 51,
1326–1335

88 Prelec, D. and Loewenstein, G. (1993) Preferences for sequences of
outcomes. Psychol. Rev. 100, 91–108

89 Ariely, D. and Carmon, Z. (2000) Gestalt characteristics of experiences:
the defining features of summarized events. J. Behav. Decis. Making
13, 191–201

90 McClure, S.M. et al. (2007) Time discounting for primary rewards. J.
Neurosci. 27, 5796–5804

91 Glimcher, P. et al. (2007) Neuroeconomic studies of impulsivity: now or
just as soon as possible? Am. Econ. Rev. 97, 142–147

h information initiative

ading voluntary health organizations to create

atients and caregivers close a crucial information

dicated to disseminating medical research.

th increased online access to our peer-reviewed

, together with content from back issues. The

ion into materials for patients and link to the full

ticles on their websites.

seeking the latest information about treatment

iable research available for specific diseases.

www.patientinform.org

• Intertemporal choice – toward an integrative framework

Economic, psychological and neuroscientific perspectives on intertemporal choice
Time discounting
Other dimensions of intertemporal choice
Anticipation
Self-control
Representation
Conclusion
Acknowledgements
References

Consumer intertemporal preferences

Gal Zauberman1 and Oleg Urminsky2

Available online at

www.sciencedirect.com

ScienceDirect

Consumers’ intertemporal preferences have been studied

across multiple theoretical and applied areas. This article

outlines research showing that the context in which

intertemporal preferences are expressed matters, as well as

research exploring the mechanisms that account for these

effects. These processes range from emotion-based to various

cognitive-based accounts, and focus on the outcomes relevant

to the choice, the future self, the perception of resources, and

the perception of the time horizon relevant to the choice. The

various mechanisms surveyed all tend to result in a heightened

motivation for an immediate outcome, compared to a distant

one. Understanding these mechanisms can yield better

designed behavioral interventions that could increase

farsighted consumer decision making and improve consumers’

long-term well-being.

Addresses
1 Yale University, USA
2 University of Chicago, USA

Corresponding authors: Zauberman, Gal (gal.zauberman@yale.edu) and

Urminsky, Oleg (Oleg.Urminsky@chicagobooth.edu

)

Current Opinion in Psychology 2016, 10:136–141

This review comes from a themed issue on Consumer behavior

Edited by Jeff Joireman and Kristina M Durante

For a complete overview see the Issue and the Editorial

Available online 22th January 2016

http://dx.doi.org/10.1016/j.copsyc.2016.01.005

2352-250X/Published by Elsevier Ltd.

Intertemporal choices range from the very simple to the

complex, but all hinge on a tradeoff between a sooner

outcome with lower value (e.g. $10 tomorrow) and a later

outcome with higher value ($20 in a year). A wide range of

consumer decisions share this basic temporal structure,

such as whether to have a cookie for dessert or opt for

the healthier but less tasty option; whether to purchase

the more costly and efficient appliance or car that pro-

vides savings in the future; whether to spend money and

time now to refinance a mortgage to a lower future

interest rate, or even whether to impose a carbon tax

now for future environmental benefit.

The literature on intertemporal preferences, across mul-

tiple academic disciplines, including economics, psychol-

ogy, business, and public policy has grown extensively

over the last 25 years. The amount of new research on

Current Opinion in Psychology 2016, 10:136–141

intertemporal choice is due to both the complexity of the

psychological processes and the wide range of potential

applications. Prior reviews have discussed how the time

discounting literature in economics and psychology de-

veloped [1
��

], models of intertemporal choice [2], and the

psychological foundations of intertemporal decisions and

their behavioral implications [3
��

].

In this short review article we will therefore only provide

an introduction to this vast literature, focusing on what

motivates consumer patience or impatience. The main

goal of the current article is primarily to introduce the

reader to the psychological foundation of intertemporal

decisions, and will be structured as follows: (a) a brief

discussion of early work, mostly examining empirical

regularities, followed by (b) a discussion key psychologi-

cal processes that underlie these decisions.

The nature of intertemporal preferences
In intertemporal decisions, people discount the value of

an option, based on the delay to receive the option. The

amount by which an option’s value declines when it is

delayed is captured by a discount rate. Early research on

the behavioral aspects of intertemporal preferences has

documented numerous ‘anomalies’, or violations of a

normative standard — the discounted utility model [4].

In particular, the normative model assumes that the

discount rate in intertemporal decisions is constant and

does not depend on the source of utility (e.g. whether the

now vs. later decision is about time, money, or food), since

it is the utility that is being discounted. A great deal of

evidence has been amassed showing that these assump-

tions are commonly violated [1
��

,3
��

].

The first notable empirical finding is impatience — indi-

viduals tend to forego larger future rewards in order to

receive smaller rewards sooner, a behavior that has often

been referred to as high rate of discounting. Researchers

have also documented a great deal of heterogeneity across

people and situations in their degree of patience. It is

often unclear what constitutes a non-normatively high

rate of discounting, and the prevailing monetary market

rates are often used as a basis of comparison. However,

other normative factors such as risk, low liquidity and

short-term opportunity costs may also contribute to high

discount rates.

Researchers have also documented that intertemporal

preferences are highly context dependent. For example,

the empirical discount rate is higher for short delays than

longer delays, higher for smaller amounts than larger

amounts, higher for gains than for losses [5], higher when

www.sciencedirect.com

mailto:gal.zauberman@yale.edu

mailto:Oleg.Urminsky@chicagobooth.edu

http://www.sciencedirect.com/science/journal/2352250X/10

http://dx.doi.org/10.1016/j.copsyc.2016.06.011

http://dx.doi.org/10.1016/j.copsyc.2016.01.005

http://www.sciencedirect.com/science/journal/00000000

Consumer intertemporal preferences Zauberman and Urminsky 137

delaying a current amount than when expediting a future

amount [6,7], higher when expressed in terms of delays

rather than dates (e.g. on March 1st vs. in 6 months) [8,9],

and is often different for different resources (e.g. higher

for future time than future money

[10
��

]).

The empirical regularity that has received the most

attention is the sensitivity of discount rates for a given

delay to when that delay will occur. A large literature has

demonstrated higher (annualized) discounting for delays

of immediate outcomes than for the same delay of a future

outcome. That is, while people often require more to

delay for one year than one month, the annualized (or per

day) rate will typically be higher for shorter than longer

periods. For example, Thaler [5] found median discount-

ing over a set of values to be 345% over a one-month

delay, 120% over a one-year delay, and only 19% over a

10-year delay. The implication of this sensitivity of dis-

counting to time horizons is that preferences are time

inconsistent, which would then result in preference rever-

sals [11
�
]. For instance, a person who prefers $1 today over

$2 in a week might nevertheless prefer $2 in a year and

one week over $1 in a year. This tendency for higher

discounting of present delays is often referred to as

‘hyperbolic discounting,’ ‘declining impatience,’ or ‘pres-

ent bias’.

Psychological determinants of intertemporal
choice
The early work documenting empirical regularities and

violations of normativity provided an important step in

our understanding of how people make intertemporal

tradeoffs, but the psychological factors underlying time

preferences were not of primary interest. More recently,

research has shifted toward a more systematic study of the

psychological determinants of intertemporal

preferences.

It is important to note upfront that intertemporal prefer-

ences are complex and no single psychological mecha-

nism could possibly explain all situations. Still,

understanding the psychological underpinnings may re-

sult in a better understanding of intertemporal prefer-

ences and behavioral interventions that would influences

preferences.

Emotional accounts. George Ainslie [11�] noted the cen-
tral role of impulsivity in intertemporal decisions. Loe-

wenstein [12] argued that visceral factors, especially drive

states (e.g. hunger), have a significant influence on inter-

temporal decisions, in particular because people often do

not anticipate the influence of these factors on their

decisions. Stimuli that are associated with such factors

and can thus satisfy the particular state of deprivation

(such as water when thirsty, etc.) are most likely to display

impulsive preferences that are difficult to anticipate. In

line with this affect based mechanism, Shiv and Fedor-

ikhin [13] present evidence that the preference for an

www.sciencedirect.com

affect-rich chocolate cake (with immediate benefits of

taste) versus a more affect-poor fruit salad (with long-term

benefits of health) increases when cognitive resources are

low (e.g. under cognitive load), reducing people’s ability

to override impulsive tendencies. However, there is also

evidence that the discounting of visceral rewards over

short experienced delays, where impulsivity is likely to

play the largest role, represents a different type of dis-

counting, distinct from prospective discounting of future

monetary rewards [14]. Differences in emotional states

may also directly impact discounting, such as sad people

being more impatient [15].

Goal proximity. Intertemporal choices may also represent
a conflict between competing goals. Consistent with this

possibility, Urminsky and Kivetz [16] document a ‘mere

token’ effect, in which providing perceived progress on

the immediacy goal (i.e. adding a small immediate

amount to both the sooner-smaller and later-larger

options) increases the later-goal motivation (choices of

the later-larger option), particularly when choice conflict

is high. More broadly, the preference for immediacy in

time discounting parallels the goal gradient in motivation,

in which nearer outcomes are more motivating [17,18
��

].

While some goal gradient results could be explained by

discount rates, Urminsky and Goswami [19] indepen-

dently manipulate goal completion and reward timing,

and find evidence that goal gradient effects may contrib-

ute to elicited time discounting.

Connectedness. Intertemporal choices involve a tradeoff
between costs and benefits to the present and future self.

Parfit [20] argued that people who see their present and

future selves as the same person should normatively

weight delayed outcomes more highly than if they see

the future self as fundamentally different, almost like

another person. Recent empirical research suggests that

the degree of psychological ‘connectedness’ people have

with their future self (i.e. the perceived stability of their

identity [21]) relates to their motivation to forego imme-

diate consumption and benefit the future self [22
�
,23
��

].

Neural-activation approximations of connectedness cor-

relate with discount rates [24], and people who have been

made to feel more connected to their future selves exhibit

lower discount rates [23
��

].

Differences in perceived connectedness over time can

also help explain hyperbolic discounting [22
�
], as both

patience and connectedness to the future self decline

more over time from the present than from a future

starting point.

Mental representation. The way in which options are
mentally represented seems to play a key role in inter-

temporal choices. Construal Level Theory [25] argues

that evaluations of the near future are more concrete,

whereas the evaluations of future outcomes are more

Current Opinion in Psychology 2016, 10:136–141

138 Consumer behavior

abstract. The level of representation can then affect

intertemporal preferences, as abstract mental construal

leads to greater ability to compare non-alignable differ-

ences [26], to more self-control [27] and less present-bias

[10
��

,28]. Malkoc and Zauberman [10
��

] also demonstrat-

ed that the greater concreteness of outcomes in the near

future, compared to the distant future, contributes to

higher discounting in delay versus expedite decisions.

When considering whether to delay a DVD available

today, the reduction in enjoyment from watching it later

is more vivid than the gain in enjoyment when consider-

ing whether to expedite the receipt of a DVD originally

expected next month [28]. These differences in repre-

sentations are malleable, and mentally simulating future

outcomes moderates the standard temporal construal

effects by changing the weight of the different attributes

[29].

Opportunity costs. In those intertemporal decisions
where the tradeoff is implicit (e.g. whether or not to

purchase, which trades-off spending money now vs. sav-

ing for the future), people may also have an incomplete

representation, and fail to appreciate the more remote

future consequences of their choices, contributing to

present bias. Recent research has shown that people often

fail to take into account unspecified opportunity costs of

their decisions [30,31], and both connectedness to the

future self and discount rates better predict consumer

spending choices when opportunity costs are made salient

[32
�
], see Figure 1. Zauberman [33] shows that the failure

to consider future switching costs is also associated with

consumer lock-in. That is, a consumer buys boots at

Zappos.com, without realizing that the next time they

buy a pair it will be easier to go back there, compared to

Figure 1

60%

P
ro

b
a
b
ili

ty
o

f

C

h
o
o
si

n
g

E
xp

e
n
si

ve
P

ro
d
u
ct

(
+

/–
S

E
M

)

50%

40%

30%

20%

10%

0%
Low Connectedness,
Tradeoffs Not Cued

High Connectednes
Tradeoffs Not Cue

Joint effect of connectedness and opportunity cost salience (rank first = hig

option). People are most likely to prioritize saving over spending when they

choices about less strongly desired products.

Current Opinion in Psychology 2016, 10:136–141

the competition. This future effort is being discounted,

making them subsequently more likely to go back to

Zappos.com than they had initially anticipated.

Resource slack. More broadly, Slack Theory [10��] argues
that the perceived level of available resources, or ‘slack’,

influences intertemporal preference. Slack is ‘the per-

ceived surplus of a given resource available to complete a

focal task without causing failure to achieve goals associ-

ated with competing uses of the same resource’ [10
��

].

For example, Zauberman and Lynch [10
��

] show that

intertemporal preferences, including overall discount

rates, the extent of hyperbolic discounting, and differ-

ences in discounting between resources (i.e. time and

money) can be explained by differences in perceived

slack over time. They show that because people generally

believe that they will have more slack in the future (e.g. I

expect to be much less busy in 3 months than I am now),

and because the perceived increase in slack is greater for

time than for money (how much more free time I will

have in 3 months shows more growth than how much

more money I expect to have in 3 months), people also

tend to discount time more than money. This theory also

predicts that people will show negative time discounting,

preferring to complete a task or take on an expense now

rather than later, when they expect less slack in the future

than the present.

Time perception. While the cognitive mechanisms men-
tioned so far have centered on how people perceive the

value of alternatives, recent work has started to explore

the role of how the time horizon (delay) itself is perceived

and considered. The role of time in intertemporal deci-

sions could be conceptualized in terms of the weight

Low Connectedness,
Tradeoffs Cued

s,
d

High Connectedness,
Tradeoffs Cued

Three More Desirable Products

Three Less Desirable Products

Current Opinion in Psychology

h; choose first = low) on price sensitivity (choosing the more expensive

are connected to the future self, thinking about tradeoffs, and making

www.sciencedirect.com

Consumer intertemporal preferences Zauberman and Urminsky 139

Figure 2

3

50

300

250

200

150

100

50

0
3 6 9 12

Months

D
is

c
o

u
n

t
R

a
te

(
%

)

Objective time
Subjective time

15 18 21 24 27 30 33 36

Current Opinion in Psychology

The rate of discounting calculated based on objective and subjective

time. The figure shows classic hyperbolic discounting with respect to

objective time, but a near-constant rate of discounting with respect to

subjective time.

given to the time delay versus the value being delayed

[34,35], as well as the way in which time is actually

subjectively perceived [36
��

,37,38].

Zauberman et al. [36��] empirically demonstrated that
people’s perception of future time durations follows a

standard nonlinear psychophysical function rather than a

linear mapping to calendar time, which can account for

observed hyperbolic discounting (see Figure 2). Further-

more, those individuals who perceived a given future

duration as longer discounted outcomes over that dura-

tion more steeply, compared to those who perceived the

delay as shorter [37].

Factors that change the perceived length of a given delay

also have been found to change the level of discounting

over the same duration. Zauberman et al. [36��] found that
asking people to judge expected durations of various tasks

(e.g. learning a new language, or painting a house), makes

people more sensitive to time and more linear in their

perceptions, and they therefore show less hyperbolic

discounting. Kim et al. [37] applied the relationship
between spatial distance and temporal distance, where

people judge a given delay to be longer when it is

associated with a longer spatial distance than a shorter

one (e.g. a far-away vs. nearby location). They then

showed that the subjectively longer time judgments

are associated with more discounting. Following a similar

logic, Kim and Zauberman [39] showed that because

individuals perceive a given future time duration to be

longer when they are exposed to sexual cues, they were

more impatient for immediate monetary rewards when

sexually aroused. In sum, these findings establish that the

way people perceive future time itself is an important

www.sciencedirect.com

factor in how they form their intertemporal preferences

(for brain imaging evidence, see Cooper et al. [40]).

Conclusions
Gaining a better understanding how people form inter-

temporal preferences has been of great interest across

multiple theoretical and applied areas because of its

direct relevance to a wide range of real-world behaviors.

Prior research has found that intertemporal preferences

relate to people’s savings behaviors [41
�
,42], consumer

self-control and purchase decisions [32
�
,43–45], employ-

ment decisions [46], educational investment [47,48], en-

ergy conservation [49], and health behaviors and

outcomes [50–52] (see Urminsky and Zauberman [3
��

]

for a full integrative review).

This article provided a brief overview of the underlying

psychological mechanisms that drive intertemporal pre-

ferences. The mechanisms outlined range from emotion-

based to cognitive, and relate to the decision context,

mental representations, how people think about their

future self and their goals, the perception of resources

and outcomes, and the perception of the time horizon

relevant to the choice.

While intertemporal preferences are inherently multiply

determined, a great deal of progress has been made in

recent years in understanding the processes involved in

intertemporal decisions. What is common across the

various factors influencing intertemporal preferences is

that all these mechanisms influence the relative attrac-

tiveness of achieving a present goal compared to a later

more distant one.

Further research is needed to better understand how

these different mechanisms interact in shaping intertem-

poral preferences, as well as the mapping between time

preferences and how people make relevant real-world

decisions [53
�
]. While key pieces of the puzzle have been

identified, much work remains to develop a comprehen-

sive theory that will enable us to predict under what

conditions people will be most likely to make farsighted

choices, in their long-term self-interest. This will result in

better-designed behavioral interventions that could

improve consumer decision making and well-being.

Conflict of interest statement
Nothing declared.

References and recommended reading
Papers of particular interest, published within the period of review,
have been highlighted as:

� of special interest
�� of outstanding interest

1.
��

Frederick S, Loewenstein G, O’Donoghue T: Time discounting
and time preference: a critical review. J Econ Lit 2002,
40:351-401.

Current Opinion in Psychology 2016, 10:136–141

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0005

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0005

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0005

140 Consumer behavior

A detailed review of the development of the time discounting literature in
economics and psychology, with an emphasis on synthesizing results
and contrasting economic and psychological accounts.

2. Read D: Intertemporal choice. In The Blackwell Handbook of
Judgment and Decision Making. Edited by Koehler DJ, Harvey N.
Oxford: Blackwell; 2004:424-443.

3.
��

Urminsky O, Zauberman G: In The Psychology of Intertemporal
Preferences. Edited by Wu G, Keren G. Blackwell Handbook of
Judgment and Decision Making, Wiley-Blackwell; 2016.
(forthcoming).

A review of contemporary work on time discounting, with detailed
analysis of measurement, psychological determinants, and implications
of discounting for decision making.

4. Samuelson Paul A: A note on measurement of utility. Rev Econ
Stud 1937, 40:155-161.

5. Thaler RH: Some empirical evidence on dynamic
inconsistency. Econ Lett 1981, 8:201-207.

6. Loewenstein G: Frames of Mind in Intertemporal Choice. Carnegie
Mellon University Research Showcase, Paper 92. 1988.

7. Malkoc SA, Zauberman G: Deferring versus expediting
consumption: the effect of outcome concreteness on
sensitivity to time horizon. J Marketing Res 2006, 43:618-627.

8. LeBoeuf RA: Discount rates for time versus dates: the
sensitivity of discounting to time-interval description. J
Marketing Res 2006, 43:59-72.

9. Read D, Frederick S, Orsel B, Rahman J: Four score and seven
years from now: the date/delay effect in temporal discounting.
Manage Sci 2005, 51:1326-1335.

10.
��

Zauberman G, Lynch JG: Resource slack and propensity to
discount delayed investments of time versus money. J Exp
Psychol: Gener 2005, 134:23-37.

This research demonstrates that people discount delayed outcomes as a
result of perceived changes over time in supplies of slack. Slack is the
perceived surplus of a given resource available to complete a focal task.
Perceived slack determine the extent and the pattern of delay discount-
ing, including hyperbolic discounting. They use this framework to explain
differential propensity to delay investments and receipts of time and
money.

11.
�

Ainslie G: Specious reward: a behavioral theory of
impulsiveness and impulse control. Psychol Bull 1975,
82:463-496.

A seminal paper that posited a link between research in animal behavior
on time inconsistency and human impatience and self-control, using a
hyperbolic discounting model of behavior.

12. Loewenstein GF: Out of control: visceral influences on
behavior. Organ Behav Hum Decis Process 1996, 65:272-292.

13. Shiv B, Fedorikhin A: Heart and mind in conflict: the interplay of
affect and cognition in consumer decision making. J Consum
Res 1999, 26:278-292.

14. Jimura K, Myerson J, Hilgard J, Keighley J, Braver TS, Green L:
Domain independence and stability in young and older adults’
discounting of delayed rewards. Behav Process 2011,
87:253-259.

15. Lerner JS, Li Y, Weber EU: The financial costs of sadness.
Psychol Sci 2012, 23:72-79.

16. Urminsky O, Kivetz R: Scope insensitivity and the ‘mere token’
effect. J Marketing Res 2011, 48:282-295.

17. Hull CL: The goal-gradient hypothesis and maze learning.
Psychol Rev 1932, 39:25.

18.
��

Kivetz R, Urminsky O, Zheng Y: The goal-gradient hypothesis
resurrected: purchase acceleration, illusionary goal progress,
and customer retention. J Marketing Res 2006, 43:39-58.

Demonstrates goal gradient behaviors in humans in the context of
incentive programs, demonstrating that people are more motivated to
when goal completion is nearer in time.

19. Urminsky O, Goswami I: Impatient to Achieve or Impatient to
Receive: How the Goal Gradient Effect Underlies Time
Discounting. University of Chicago Working Paper; 2016.

Current Opinion in Psychology 2016, 10:136–141

20. Parfit D: Reasons and Persons. Oxford, UK: Oxford University
Press; 1984.

21. Urminsky O, Bartels D, Giuliano P, Newman G, Puntoni S, Rips L:
Choice and self: how synchronic and diachronic identity shape
choices and decision making. Marketing Lett 2014, 25:281-291.

22.
�

Bartels DM, Rips LJ: Psychological connectedness and
intertemporal choice. J Exp Psychol Gen 2010, 139:49-69.

23.
��

Bartels D, Urminsky O: On intertemporal selfishness: the
perceived instability of identity underlies impatient
consumption. J Consum Res 2011, 38:182-198.

This paper demonstrated that manipulating the perceived connectedness
to one’s future self changed people’s time discounting.

24. Ersner-Hershfield H, Garton MT, Ballard K, Samanez-Larkin GR,
Knutson B: Don’t stop thinking about tomorrow: individual
differences in future self-continuity account for saving.
Judgment Decis Mak 2009, 4:280.

25. Liberman N, Trope Y: The role of feasibility and desirability
considerations in near and distant future decisions: a test of
temporal construal theory. J Pers Soc Psychol 1998, 75:5.

26. Malkoc SA, Zauberman G, Ulu C: Consuming now or later? The
interactive effect of timing and attribute alignability. Psychol
Sci 2005, 16:411-417.

27. Fujita K, Trope Y, Liberman N, Levin-Sagi M: Construal levels and
self control. J Pers Soc Psychol 2006, 90:351-367.

28. Malkoc SA, Zauberman G, Bettman JR: Unstuck from the
concrete: carryover effects of abstract mindsets in
intertemporal preferences. Organ Behav Hum Decis Process
2010, 113:112-126.

29. Zhao M, Hoeffler S, Zauberman G: Mental simulation and
preference consistency over time: the role of process-versus
outcome-focused thoughts. J Marketing Res 2007:379-388.

30. Frederick S, Novemsky N, Wang J, Dhar R, Nowlis S: Opportunity
cost neglect. J Consum Res 2009, 36:553-561.

31. Spiller SA: Opportunity cost consideration. J Consum Res 2011,
38:595-610.

32.
�

Bartels D, Urminsky O: To know and to care: how awareness
and valuation of the future jointly shape consumer savings and
spending. J Consum Res 2015, 41:1469-1485.

Using spending and savings decision, this paper demonstrates that time
discounting predicts farsighted decision-making primarily when oppor-
tunity costs of current decisions are made salient. This helps to explain
mixed results in the literature about whether time discounting relates to
farsighted behaviors, in contexts where people may have failed to con-
sider long-term consequences.

33. Zauberman G: The intertemporal dynamics of consumer lock-
in. J Consum Res 2003, 30:405-419.

34. Ebert JE, Prelec D: The fragility of time: time-insensitivity
and valuation of the near and far future. Manage Sci 2007,
53:1423-1438.

35. Scholten M, Read D: The psychology of intertemporal
tradeoffs. Psychol Rev 2010, 117:925-944.

36.
��

Zauberman G, Kyu Kim B, Malkoc S, Bettman JR: Time
discounting and discounting time: subjective time perception
and intertemporal preferences. J Marketing Res 2009,
46:543-556.

This research shows that subjective perceptions of prospective duration
are nonlinear and concave in objective time, consistent with psycho-
physical principles. This lack of sensitivity can explain hyperbolic dis-
counting.

37. Kim BK, Zauberman G: Perception of anticipatory time in
temporal discounting. J Neurosci Psychol Econ 2009, 2:91.

38. Kim BK, Zauberman G, Bettman JR: Space, time, and
intertemporal preferences. J Consum Res 2012, 39:867-880.

39. Kim BK, Zauberman G: Can Victoria’s Secret change the future?
A subjective time perception account of sexual-cue effects on
impatience. J Exp Psychol Gen 2013, 142:328.

www.sciencedirect.com

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0010

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0010

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0010

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0010

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0015

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0015

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0020

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0020

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0025

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0025

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0030

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0030

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0035

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0035

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0035

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0040

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0040

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0040

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0045

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0045

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0045

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0050

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0050

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0050

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0055

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0055

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0055

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0060

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0060

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0065

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0065

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0065

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0070

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0070

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0070

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0070

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0075

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0075

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0080

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0080

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0085

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0085

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0090

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0090

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0090

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0095

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0095

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0095

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0100

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0100

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0105

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0105

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0105

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0110

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0110

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0115

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0115

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0115

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0120

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0120

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0120

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0120

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0125

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0125

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0125

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0130

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0130

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0130

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0135

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0135

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0140

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0140

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0140

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0140

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0145

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0145

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0145

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0150

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0150

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0155

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0155

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0160

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0160

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0160

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0165

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0165

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0170

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0170

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0170

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0175

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0175

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0180

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0180

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0180

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0180

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0185

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0185

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0190

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0190

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0195

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0195

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0195

Consumer intertemporal preferences Zauberman and Urminsky 141

40. Cooper N, Kable J, Kyu Kim B, Zauberman G: Brain activity in
valuation regions while thinking about the future predicts
individual discount rates. J Neurosci 2013, 33:13150-13156.

41.
�

Meier S, Sprenger C: Present-biased preferences and credit
card borrowing. Am Econ J Appl Econ 2010, 2:193-210.

42. Bidewell J, Griffin B, Hesketh B: Timing of retirement: including a
delay discounting perspective in retirement models. J Vocat
Behav 2004, 68:368-387.

43. Dubé JP, Hitsch G, Jindal P: The joint identification of utility and
discount functions from stated choice data: an application
to durable goods adoption. Quant Marketing Econ 2014,
12:331-377.

44. Milkman KL, Rogers T, Bazerman MH: Highbrow films gather
dust: time inconsistent preferences and online DVD rentals.
Manage Sci 2009, 55:1047-1059.

45. Shapiro J: Is there a daily discount rate? Evidence from the
food stamp nutrition cycle. J Public Econ 2005, 89:303-325.

46. Schoenfelder TE, Hantula DA: A job with a future? Delay
discounting, magnitude effects, and domain independence of
utility for career decisions. J Vocat Behav 2003, 62:43-55.

www.sciencedirect.com

47. Castillo M, Ferraro P, Jordan J, Petrie R: The today and tomorrow
of kids: time preferences and educational outcomes of
children. J Public Econ 2011, 95:1377-1385.

48. Lee NC, Krabbendam L, Dekker S, Boschloo A, de Groot RHM,
Jones J: Academic motivation mediates the influence of
temporal discounting on academic achievement during
adolescence. Trends Neurosci Educ 2012, 1:43-48.

49. Allcott H, Greenstone M: Is there an energy efficiency gap? J
Econ Perspect 2012, 26:3-28.

50. Adams J, Nettle D: Time perspective, personality and smoking,
body mass, and physical activity: an empirical study. Brit J
Health Psychol 2009, 14:83-105.

51.
�

Chabris CF, Laibson D, Morris CL, Schuldt JP, Taubinsky D:
Individual laboratory-measured discount rates predict field
behavior. J Risk Uncertain 2008, 37:237-269.

52. Melanko S, Larkin KT: Preference for immediate reinforcement
over delayed reinforcement: relation between delay
discounting and health behavior. J Behav Med 2013, 36:34-43.

53.
�

Lynch JG Jr, Zauberman G: When do you want it? Time
decisions, and public policy. J Public Policy Marketing 2006,
25:67-78.

Current Opinion in Psychology 2016, 10:136–141

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0200

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0200

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0200

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0205

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0205

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0210

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0210

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0210

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0215

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0215

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0215

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0215

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0220

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0220

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0220

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0225

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0225

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0230

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0230

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0230

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0235

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0235

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0235

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0240

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0240

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0240

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0240

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0245

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0245

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0250

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0250

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0250

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0255

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0255

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0255

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0260

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0260

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0260

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0265

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0265

http://refhub.elsevier.com/S2352-250X(16)00007-5/sbref0265

Consumer intertemporal preferences
The nature of intertemporal preferences
Psychological determinants of intertemporal choice
Conclusions
References and recommended reading
Conflict of interest statement

862118190

-1

Nan zhou

862118190

Word Count: 591

https://www.bbc.com/news/business-49934309

According to my suggestion, it is an example of bad framing. I can say that there must be the title of “US trade war with China is bringing fall in the unemployment rate to a 50-year low of 3.5%”. it is an appropriate and better frame to use. The stats of the previous fifteen months with the introduction of a trade war are a clear depiction of it that frame is not appropriate here. It doesn’t highlight the actual issue behind the rate of employment decline. The new frame is suitable to show how badly a trade war is affecting the US economy. This new frame is not changing the context of the news or the agenda but actually paying a more objective look to the issue. the numerical data is supporting the frame that not only the wording is appropriate there is an issue which is ignored while framing the title. The stats are ignored, the numerical data shows that the sharp slowdown in the manufacturing industry is coming after September. The US-China trade dispute is not only affecting the US but also effecting the whole global economy.

My new frame is not changing the objective information but it giving new insights to the issue. The US economy report came with a decline in the manufacturing rate which is slower than 10 years in September. There is fear that the US economy will face a further decline in the 15 months trade war so it would be best to use a better new frame here which highlights the issue in a title and attracts the reader to go through the current problem with a cause. The title is a major thing that can force the reader to engage in a topic and the agenda must be there in the title. The new frame is a great way to express the current issue of trade and its effects on the US economy.

As WTO warns the US about the trade war that it could hit the living standards because the employment is sharply decreased and jobless people are increasing. The federal reserve interest rate cut is expected this year which could be dangerous. The manufacturing sector has the weakest point now in the US economy and the US economy faced this issue from the past three years but with the service sector, the recession is expected to avoid. The problem is that the US economy matters a lot because it is the biggest economy and if the growth of the American economy slows down then expect china the rest of the world will suffer from it.

According to my observation, the title is badly framed because it shows the employment decline only but not really give the issue behind this decline. As the US economy matters along then the US recession would bring suffering to the entire world. the US federal rates are cut in the year and more interest cut is expected at the end of the year. So, the issue is serious to consider and the better frame would make it more effective for the readers.

As the global economy is linked with the US economy then the overall business decline would have occurred if the US trade war with china remained as it is now. The economic recession could have occurred with the retail and service industry (BBC, 2019). When I read the title of this business news I get confused with the title and claimed it as a bad frame.