Time ≠ Time ≠ Time: A Research Agenda Mental Temporal Accounting and the Opening of Contract Theory for Work-Leisure Trade-Off Attention

Abstract

Time tacts life. While all human face the same natural constraints of 24-hours days, behavioral economics found individuals differing in discounting preference for immediate rewards over delayed gratification. Regarding monetary gains, individuals were also shown to hold mental accounts dependent on a reference point but also in regards as to how to allocate money to causes individuals care about. But what if individuals also differ in mental temporal accounts, hence regarding how to spend their time? Decision makers may have natural mental temporal accounts for how to spend 24 hours a day, 720 hours a month, 8760 hours a year or 700800 hours an average life? Could it be that individuals have implicit mental accounts for how much time to spend on their own, how much time to be allocated towards working and how much time to just enjoy life in leisure? If so, could individuals be susceptible to external cues that nudge them into certain mental time-frames that determine their mental time allocation preferences? Could this mental accounting also depend on reference points, such as the age of the individual and critical life events, such as becoming parents? If individuals differ in time spent on their own and social time but also vary in their choices of time spent working and leisure time, we would need to revise contract theory’s primary focus on incentivizing with monetary gains and call for attention to a natural mental temporal accounting trade-off decision between work and leisure time. By doing so we could show that the classical mental accounting theory (Thaler, 1999) actually describes similar processes as mental temporal accounting how to spend time but also dependent on the reference point of age. The paper is structured as follows: The theoretical part 2 describes the behavioral economics idea of mental accounting in the finance domain (Section 2.1) as well as hyperbolic discounting deviations from standard neoclassical discounting functions (Section 2.2.) in order to extend these concepts in the domain of time in Section 2.3. Part 3 proposes to study (1) whether mental accounting also occurs for time; (2) time allocation preferences based on economic, social and environmental contexts as well as age; (3) how individuals can be nudged into different time allocation preferences based on specific mindsets. Part 4 discusses the results and calls for an opening of (1) the behavioral economics idea of the classical mental accounting theory (Thaler, 1999) (2) connecting it to mental temporal accounting as well as (3) neoclassical contract theory for work-leisure time trade-offs alongside providing future research prospects. Elucidating how contexts and experiencing critical life stages influence temporal activity allocation choices promises to improve manifold decisions on education, health, asset management, career paths and common goods preservation throughout life.