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Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does

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  • Marzilli Ericson, K. M.
  • White, J. M.
  • Laibson, David I.
  • Cohen, J. D.

Abstract

Heuristic models have been proposed for many domains involving choice. We conducted an out-of-sample, cross-validated comparison of heuristic models of intertemporal choice (which can account for many of the known intertemporal choice anomalies) and discounting models. Heuristic models outperformed traditional utility-discounting models, including models of exponential and hyperbolic discounting. The best-performing models predicted choices by using a weighted average of absolute differences and relative percentage differences of the attributes of the goods in a choice set. We concluded that heuristic models explain time-money trade-off choices in experiments better than do utility-discounting models.

Suggested Citation

  • Marzilli Ericson, K. M. & White, J. M. & Laibson, David I. & Cohen, J. D., 2015. "Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does," Scholarly Articles 30367415, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:30367415
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