How Time Flies!

Abstract

The paper identifies a potential gap between intertemporal choices and time preference: The elicited intertemporal decisions could be partly driven by a biased perception of time and thus may not completely reveal the actual time preference. To test this, we explore the causal relationship between time perception and intertemporal choices by conducting a laboratory experiment, in which cognitive load is used as a stimulating instrument to induce differences in time perception. We establish that the perceived time lengths for subjects with high cognitive load are shorter than those with low cognitive load and that individuals who underestimate time appear more patient in their intertemporal decisions. The mediation analyses show that time perception mediates a significant part of the cognitive load’s effect on intertemporal choices. Our study thus demonstrates that the time preference identified by intertemporal choices might be confounded by the potentially biased perception of how time flies.