Outcome Framing in Intertemporal Choice: The DRIFT Model

Abstract

We describe the DRIFT model, a heuristic description of framing effects in intertemporal choice, and four experiments testing its implications. In the experiments we vary how outcomes are framed – either as total interest earned, as the rate of interest or, as is traditionally done in studies of intertemporal choice, as total amount earned. In addition, we describe the future earnings as resulting from investment, or else make no mention of its origin. People are much more patient when outcomes are described as the result of investment. For small amounts they are more patient when the returns are given in interest terms (whether as rates or as total amount earned) when amounts are small, but for large amounts, this effect is eliminated or even reversed. Consequently, the magnitude effect (less discounting for larger amounts) is attenuated for both interest frames. Most strikingly, the interest rate frame reverses the common finding of “hyperbolic” discounting (less discounting for longer delays). Composite frames, which present two different characterizations of the same outcomes, result in preferences that lie between those observed for the component frames, and in our studies show “exponential” discounting.. We suggest many major results in studies of time preference arise when frames emphasize option features – specifically differences in times and monetary amounts – that naturally produce hyperbolic discounting and the magnitude effect. Alternative framings eliminate or reverse these results, and the DRIFT model summarizes how this happens.