Addendum: Recent Developments
Recent progress in studies on intertemporal choice witnessed a dramatic shift of research focus from the role of valuation (i.e., utility functions) to temporal cognition. Since Takahashi (2005) proposed that “hyperbolic” discounting (one of the most widely-known anomalies in intertemporal choice) may be attributable to nonlinear time perception during intertemporal decision making, much evidence which confirms the idea of the nonlinear time perception theory of hyperbolic discounting has accumulated (Takahashi et al. 2008; Zauberman et al. 2009; Han and Takahashi 2012). Notably, Han and Takahashi (2012) demonstrated that hyperbolicity (i.e., decreasing impatience) is better explained by nonlinearity of psychological time than concavity of utility functions, rejecting the well-known Loewenstein-Prelec theory (1992) of hyperbolic discounting.
In addition to hyperbolic discounting, other prominent anomalies in intertemporal choice may be explained by the psychophysical characteristics of psychological time (Takahashi and Han 2012), which is proposed as “tempospect” theory of intertemporal choice. For instance, the sign effect (i.e., gain is more rapidly time-discounted than loss) is due to gain-loss asymmetry in psychological time (i.e., psychological time in waiting delayed gain is longer than that in waiting delayed loss) (Takahashi and Han 2012). Other anomalies in intertemporal choice (e.g., delay-speed up asymmetry, magnitude effect, and domain effect) can also be accounted for by the characteristics of psychological time (the subjective time-interval during intertemporal decision making) (see Takahashi and Han 2012, for details).
Neurobiologically, dopamine D2 receptors, known to be associated with temporal cognition, strongly modulates temporal discounting (Kawamura et al. 2013a). This finding is consistent with our tempospect theory of intertemporal choice. Furthermore, FKBP5 gene (a “suicide gene”, related to glucocorticoid stress hormone receptor functioning) polymorphism was shown to modulate temporal discounting (Kawamura et al. 2013b). This is the first neurogenetic evidence of our neuroeconomic theory of suicide (Takahashi 2011).
In addition to anomalies in intertemporal choice, those in decision under risk may also be explained by the nonlinearity of psychological time in repeated gambles (Takahashi 2011; Takahashi et al. 2012). This theory was also confirmed by our recent experiment (Takahashi and Han 2013). Taken together, various anomalies in economic decision can be accounted for by psychophysical characteristics of psychological time.