The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Intertemporal Choice

  • Christopher F. Chabris
  • David I. Laibson
  • Jonathon P. Schuldt
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1987

Abstract

Decisions that have consequences in multiple time periods are intertemporal choices. Individuals typically discount delayed rewards much more than can be explained by mortality effects. The most common discount function is exponential in form, but hyperbolic and quasi-hyperbolic functions seem to explain empirical data better. Individual discount rates may be measured in a variety of ways, subject to important methodological caveats. Higher discount rates are empirically associated with a variety of substance abuse and impulsive conditions, including smoking, alcoholism, cocaine and heroin use, gambling, and risky health behaviours. By contrast, low discount rates may be associated with high cognitive ability.

Keywords

Addiction Discount factor Discount rate Discounted utility Dynamic consistency Dynamic inconsistency Felicity Generalized hyperbolas Impatience Instantaneous utility Intertemporal choice Mortality Naive vs. sophisticated Neuroeconomics Normative economics Positive economics Preference reversal, Revealed preference Salience Time preference 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Christopher F. Chabris
    • 1
  • David I. Laibson
    • 1
  • Jonathon P. Schuldt
    • 1
  1. 1.