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The Psychology of Intertemporal Discounting: Why are Distant Events Valued Differently from Proximal Ones?

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Abstract

Research in intertemporal choice has been done in a variety of contexts, yet there is a remarkable consensus that future outcomes are discounted (or undervalued) relative to immediate outcomes. In this paper, we (a) review some of the key findings in the literature, (b) critically examine and articulate implicit assumptions, (c) distinguish between intertemporal effects arising due to time preference versus those due to changes in utility as a function of time, and (d) identify issues and questions that we believe serve as avenues for future research.

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Authors and Affiliations

  1. University of Toronto, Toronto

    Dilip Soman, Xiuping Li & Andrew Mitchell

  2. Temple University, Los Angeles

    George Ainslie

  3. Massachusetts Institute of Technology, Massachusetts

    Shane Frederick

  4. Duke University, USA

    John Lynch

  5. University of Colorado, Colorado

    Page Moreau

  6. London School of Economics and Political Science, London

    Daniel Read

  7. University of Florida, Florida

    Alan Sawyer

  8. New York University, New York

    Yaacov Trope

  9. INSEAD, Singapore

    Klaus Wertenbroch

  10. University of North Carolina, Chapel Hill

    Gal Zauberman

Authors
  1. Dilip Soman
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  2. George Ainslie
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  3. Shane Frederick
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  4. Xiuping Li
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  5. John Lynch
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  6. Page Moreau
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  7. Andrew Mitchell
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  8. Daniel Read
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  9. Alan Sawyer
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  10. Yaacov Trope
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  11. Klaus Wertenbroch
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  12. Gal Zauberman
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Correspondence to Dilip Soman.

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Soman, D., Ainslie, G., Frederick, S. et al. The Psychology of Intertemporal Discounting: Why are Distant Events Valued Differently from Proximal Ones?. Market Lett 16, 347–360 (2005). https://doi.org/10.1007/s11002-005-5897-x

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