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Understanding the Intertemporal Choice: A Methodological Review

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Decision Economics: Minds, Machines, and their Society (DECON 2020)

Part of the book series: Studies in Computational Intelligence ((SCI,volume 990))

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Abstract

This paper reviews the existing literature on the intertemporal choice from a methodological perspective. After a summary of the neoclassical model with its inaccuracies and controversies, the paper introduces the concept of present bias presented through time discounting research. It investigates differences in the relative evaluation and decisions made over some type of utility, generally money or goods, at different points in time by comparing the evaluation at an earlier date with one for a later date. Specifically, the hyperbolic discounting model is put forth again as well as the various standard types of present-focused models are analyzed. Furthermore, the paper discusses the recent evidence on commitment devices, how this evidence relates to theoretical questions about the demand for, and effectiveness of, commitment. An earlier generalization of the discounted utility model implied that people’s intertemporal marginal rate of substitution would diverge depending on the stretch of time a choice was made: This would give rise to a preference for commitment.

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Author information

Authors and Affiliations

  1. Department PPEQS - Economics and Quantitative Methods, University of Chieti-Pescara, Chieti, Italy

    Marco Lafratta

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  1. Marco Lafratta
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Correspondence to Marco Lafratta .

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Editors and Affiliations

  1. Department of PPEQS, Section of Economics and Quantitative Methods, University of Chieti-Pescara, Pescara, Pescara, Italy

    Edgardo Bucciarelli

  2. Department of Economics, National Chengchi University, Taipei, Taiwan

    Shu-Heng Chen

  3. AIR Institute - Deep Tech Lab, University of Valladolid, Valladolid, Spain

    Juan M. Corchado

  4. Department of Business and Economics Adminstration, University of Salamanca, Salamanca, Spain

    Javier Parra D.

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Lafratta, M. (2021). Understanding the Intertemporal Choice: A Methodological Review. In: Bucciarelli, E., Chen, SH., Corchado, J.M., Parra D., J. (eds) Decision Economics: Minds, Machines, and their Society. DECON 2020. Studies in Computational Intelligence, vol 990. Springer, Cham. https://doi.org/10.1007/978-3-030-75583-6_25

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