Intertemporal Decisions Research Articles

The effect of music tempo on consumer impatience in intertemporal decisions

PurposeThis paper aims to examine the effect of music tempo on impatience in intertemporal tradeoff decisions. It finds that fast (vs slow) tempo music increases impatience. This occurs because fast (vs slow) tempo music makes temporal distance, and hence the waiting time until the receipt of delayed benefits, feel subjectively longer.Design/methodology/approachThe study tests the hypotheses through four laboratory experiments.FindingsIn Studies 1a (N = 88) and 1b (N = 98), the results demonstrate that when participants listen to fast (vs slow) tempo music, they judge temporal distance to be longer. In Study 2 (N = 94), the results demonstrate that when participants listen to fast (vs slow) tempo music, they become more impatient when considering a smartphone purchase. In Study 3 (N = 218), the results demonstrate that when participants listen to fast (vs slow) tempo music, they become more impatient when considering a gift certificate, and that this delay discounting effect is attributable to the change in their temporal distance judgment.Research limitations/implicationsThe current research reports a novel factor that influences impatience in intertemporal decisions and temporal distance judgment.Practical implicationsThis research provides useful guidelines for retail managers and marketers regarding the effect of background music in stores.Originality/valueThis is the first study demonstrating a music tempo effect on temporal distance judgment and impatience in intertemporal tradeoff decisions.

Validating mouse-tracking: How design factors influence action dynamics in intertemporal decision making.

Mouse-tracking is an increasingly popular process-tracing method. It builds on the assumption that the continuity of cognitive processing leaks into the continuity of mouse movements. Because this assumption is the prerequisite for meaningful reverse inference, it is an important question whether the assumed interaction between continuous processing and movement might be influenced by the methodological setup of the measurement. Here we studied the impacts of three commonly occurring methodological variations on the quality of mouse-tracking measures, and hence, on the reported cognitive effects. We used a mouse-tracking version of a classical intertemporal choice task that had previously been used to examine the dynamics of temporal discounting and the date-delay effect (Dshemuchadse, Scherbaum, & Goschke, 2013). The data from this previous study also served as a benchmark condition in our experimental design. Between studies, we varied the starting procedure. Within the new study, we varied the response procedure and the stimulus position. The starting procedure had the strongest influence on common mouse-tracking measures, and therefore on the cognitive effects. The effects of the response procedure and the stimulus position were weaker and less pronounced. The results suggest that the methodological setup crucially influences the interaction between continuous processing and mouse movement. We conclude that the methodological setup is of high importance for the validity of mouse-tracking as a process-tracing method. Finally, we discuss the need for standardized mouse-tracking setups, for which we provide recommendations, and present two promising lines of research toward obtaining an evidence-based gold standard of mouse-tracking.

Improving Maladaptive Behavior: The Effect of Episodic Foresight on Delay Discounting and Its Mechanism

Delay discounting is an important part of intertemporal decision-making. This decision involves information about the costs and benefits of future possibilities, which affect people making decision. Episodic foresight therefore has a capacity to organize current action in view of anticipated events and concerns the imaginative of thinking about future events that often draw on the visual modality. In the clinic research, episodic foresight could improve maladaptive behaviors, including pathological gambling, obesity, drug and alcohol abuse. Our study explores the psychological mechanism and brain mechanism. We proposed that future research should further explore how the episodic foresight affects delay discounting and how episodic foresight is applied to clinic and behaviour modification.

An AGI with Time-Inconsistent Preferences

This paper reveals a trap for artificial general intelligence (AGI) theorists who use economists' standard method of discounting. This trap is implicitly and falsely assuming that a rational AGI would have time-consistent preferences. An agent with time-inconsistent preferences knows that its future self will disagree with its current self concerning intertemporal decision making. Such an agent cannot automatically trust its future self to carry out plans that its current self considers optimal.

Collective Intertemporal Decisions and Heterogeneity in Groups

Collective Intertemporal Decisions and Heterogeneity in Groups

Transforming brain signals related to value evaluation and self-control into behavioral choices.

The processes involved in value evaluation and self-control are critical when making behavioral choices. However, the evidence linking these two types of processes to behavioral choices in intertemporal decision-making remains elusive. As the ventromedial prefrontal cortex (vmPFC), striatum, and dorsolateral prefrontal cortex (dlPFC) have been associated with these two processes, we focused on these three regions. We employed functional magnetic resonance imaging during a delayed discounting task (DDT) using a relatively large sample size, three independent samples. We evaluated how much information about a specific choice could be decoded from local patterns in each brain area using multivoxel pattern analysis (MVPA). To investigate the relationship between the dlPFC and vmPFC/striatum regions, we performed a psychophysiological interaction (PPI) analysis. In Experiment I, we found that the vmPFC and dlPFC, but not the striatum, could determine choices in healthy participants. Furthermore, we found that the dlPFC showed significant functional connectivity with the vmPFC, but not the striatum, when making decisions. These results could be replicated in Experiment II with an independent sample of healthy participants. In Experiment III, the choice-decoding accuracy in the vmPFC and dlPFC was lower in patients with addiction (smokers and participants with Internet gaming disorder) than in healthy participants, and decoding accuracy in the dlPFC was related to impulsivity in addicts. Taken together, our findings may provide neural evidence supporting the hypothesis that value evaluation and self-control processes both guide the intertemporal choices, and might provide potential neural targets for the diagnosis and treatment of impulsivity-related brain disorders.

Use of Electroencephalography for the Study of Gain–Loss Asymmetry in Intertemporal Decision-Making

Intertemporal decision-making refers to the process whereby an individual evaluates and selects among competing alternatives based on the cost and benefit over time. While most previous studies on temporal discounting focused their attention on the gain context, only a few explored the loss context. In the present study, both the event-related potentials (ERPs) and the graph theory analysis were employed to investigate the differences in intertemporal decision-making between the gain and loss frameworks. Our results suggested that participants preferred the short latency/small amount (SS) alternatives and exhibited a smaller discount rate in a loss context compared to a gain framework. Furthermore, our ERP data indicated that the P200 component could constitute a preliminary assessment of the decision-making, related to gain and loss. In contrast, the N2 component was associated with negative emotions and showed significantly bigger amplitudes in the loss context, when compared to the gain framework. Further analyses of brain networks suggested the loss decision-making brain network to have a larger small-worldness index given individuals' loss aversion. Taken together, intertemploral decision-making in a loss context was accompanied by a greater brain response due to the negative emotions linked to loss aversion.

Risk inherent in delay accounts for magnitude effects in intertemporal decision making

If the future is indeed uncertain, then is the subjective riskiness of future gains and losses amount-dependent? To address this question, we performed two experiments, one regarding hypothetical monetary gains and the other regarding hypothetical monetary losses. Our main objective was to determine whether the magnitude effect observed in delay discounting can be explained by the subjective probability of receiving a future outcome. We employed a well-grounded discounting paradigm with a fixed-sequence procedure and the Subjective Probability Questionnaire across different magnitudes of gains and losses. We replicated prior findings indicating that the magnitude effect (observed in delay discounting) or the reverse magnitude effect (observed in probability discounting) are present for monetary gains but not for monetary losses. We found that the subjective probability of receiving future outcomes is amount-dependent for gains but not for losses. We propose that the magnitude effect can be a by-product of the risk associated with future payoffs of different magnitudes, as shown by mediation analysis. Our secondary goal was to investigate the form of the subjective probability function over time to determine if the change in risk inherent in delay is best described by the hyperbolic or exponential equations. We demonstrate that delay and probability discounting, as well as the subjective probability function, are best described by a simple hyperbolic model.

The land rental of Chinese rural households and its welfare effects

By using the survey data of China’s rural households from 2003 to 2009, we identified the determinants of renting in and out the plots and estimated their impact on household welfare. First, we developed a bivariate dynamic probit model for the behaviors of renting in and out to manage the impact of the intertemporal decision-making that has been somewhat ignored by the literature; next, we developed a panel multiple endogenous treatment effect model for land rental impact to manage the self-selection problem stemming from the unobserved variables. The results show that regardless of renting in or out, both scenarios have statistically significant positive effects on the net income and balance of disposable financial assets, and renting out also has a significant positive effect on consumption expenditure.

How Time Flies!

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.

Psychological analysis of consumer intertemporal decisions

AbstractMany consumer decisions involve trade‐offs of benefits and costs distributed over time. Such decisions are often referred to as intertemporal decisions. The current review examines how the underlying psychological drivers of intertemporal preferences inform consumer decision‐making. To this end, we identify four important consumer decision domains—financial decision‐making, hedonic purchases, time management, and health decision‐making—and use the extensive work in intertemporal choice to inform these decisions and identify routes to understanding and improving consumer decision‐making.

Inconsistency and Subjective Time Dilation Perception in Intertemporal Decision Making

A large number of studies have demonstrated that intertemporal decision making process usually results in preferences that reverse over time, or choices that are inconsistent over time. Inconsistency can be explained by different discount models by the effect of reward value perception at different moments. Otherwise, one can also understand inconsistency as the result of the time perception effect. Here, we address inconsistency as the result of a subjective time dilation perception effect. We use arguments inspired by the special theory of relativity and focused our study on a generalized model that encompasses psychophysical effects on time perception, where we look for a transformation of the time interval between the pay times of two rewards. Additionally, we present a generalized two-argument hyperbolic utility function for the Bernoulli (logarithmic) one, associating their difference to subjective time intervals.

Pension Communication in the Netherlands and Other Countries

In many countries, pension reforms reduce the generosity of collective pensions and shift the responsibility for an adequate standard of living after retirement to individuals and their households. Individuals have to make more decisions than before on supplementary pension savings, on how to invest their DC pension assets, etc. Making such decisions is challenging, since retirement planning requires intertemporal decision-making under uncertainty and is subject to behavioural and psychological biases. Many studies in different countries have shown that the large majority lack the interest, knowledge, or skills to make such decisions in a way that is in their own best interest. Governments and the pension industry try to assist individuals in making the right decisions through pension communication. This paper focuses on experiences with pension communication, and the lessons to be learned from them. First, the paper provides an overview of the literature, addressing how pension communication is organized across countries and what can be said about its efficiency. Second, using Dutch longitudinal data at the individual level, we analyse the relations between communication (receiving an annual pension overview), pension knowledge, and conscious pension decision-making. We investigate associations and aim at estimating causal effects exploiting the timing of events.

Pattern classification differentiates decision of intertemporal choices using multi-voxel pattern analysis

In daily life, individuals frequently make trade-offs between the small-but-immediate benefits and large-but-delayed profits. This type of decision is known as intertemporal choice. Previous studies have uncovered the neurobiological mechanism of the intertemporal choice, but it still remains unclear how the patterns of brain activity predict the decisions of intertemporal choices. To fill this gap, we used functional magnetic resonance imaging (fMRI), in conjunction with the machine learning technique of multi-voxel pattern analysis (MVPA), to ascertain the predictive capability of the neuronal pattern for classifying individuals' intertemporal decisions across two independent samples. To further probe how this neuronal pattern worked in predicting individual intertemporal decision, we drew on the Power Atlas to examine the accuracies of classification within each regional mask as well. Classification findings showed that the pattern of neuronal activity over the whole-brain can correctly classify the accuracies of individual decisions up to 84.3%. Encouragingly, further analysis shows that the neuronal information encoded in three brain functional networks can predict individuals' decisions with significant discriminative power in cross-samples, namely the valuation network (e.g., striatum), the cognitive control network (e.g., dorsolateral prefrontal cortex) and the episodic prospection network (e.g., amygdala, parahippocampus gyrus, insula). Collectively, these findings advance our comprehension of the neuronal mechanism of human intertemporal decisions, and substantially reshape our understanding for this cardinal behaviour from behavioural-brain scheme to brain-behavioural configuration.

Time ambiguity during intertemporal decision-making is aversive, impacting choice and neural value coding

We are often presented with choices that differ in their more immediate versus future consequences. Interestingly, in everyday-life, ambiguity about the exact timing of such consequences frequently occurs, yet it remains unknown whether and how time-ambiguity influences decisions and their underlying neural correlates. We developed a novel intertemporal fMRI choice task in which participants make choices between sooner-smaller (SS) versus later-larger (LL) monetary rewards with systematically varying levels of time-ambiguity. Across trials, delay information of the SS, the LL, or both rewards was either exact (e.g., in 5 weeks), of low ambiguity (4 week range: e.g., in 3–7 weeks), or of high ambiguity (8 week range: e.g., in 1–9 weeks). Choice behavior showed that the majority of participants preferred options with exact delays over those with ambiguous delays, indicating time-ambiguity aversion. Consistent with these results, the ventromedial prefrontal cortex showed decreased activation during ambiguous versus exact trials. In contrast, intraparietal sulcus activation increased during ambiguous versus exact trials. Furthermore, exploratory analyses suggest that more time-ambiguity averse participants show more insula and dorsolateral prefrontal cortex activation during subjective value (SV)-coding of ambiguous versus exact trials. Lastly, the best-fitting computational choice models indicate that ambiguity impacts the SV of options via time perception or via an additive ambiguity-related penalty term. Together, these results provide the first behavioral and neural signatures of time-ambiguity, pointing towards a unique profile that is distinct from impatience. Since time-ambiguity is ubiquitous in real-life, it likely contributes to shortsighted decisions above and beyond delay-discounting.

How Are Individual Time Preferences Aggregated in Groups? A Laboratory Experiment on Intertemporal Group Decision-Making

The study of intertemporal decision-making is an interdisciplinary scientific topic of economics, psychology, and neuroscience. Most of these studies focus on individual intertemporal decisions, but little is known about the relationship between groups and individual time preferences. As a result, we aim to assess the role of group intertemporal decision-making. We experimentally investigate how to aggregate individual time preferences by clarifying who has the most influence on group decisions among heterogeneous group members. We formulate two hypotheses. The first is the multilateral bargaining hypothesis, which is based on the multilateral bargaining model. If people employ this model to reach agreement, the most patient member in a group has the greatest impact on group choices. The second is the median voter hypothesis, which is based on the median voter model. When people employ this model to reach agreement, the median patient member in a group has the greatest impact on group choices. Here, we find that the median patient member in a group has a significant impact on group decisions in an unstructured bargaining situation. This finding suggests that people use the majority voting rule during group intertemporal decision-making. Thus, our findings support the median voter hypothesis. Furthermore, the results of a chat analysis show that this result is partially due to people’s conformity with the majority opinion.

IS THE SCORECARD BALANCED? AN INVESTIGATION OF THE APPLICATION OF NONFINANCIAL MEASURES IN CEO COMPENSATION CONTRACTS ON FIRM PERFORMANCE

ABSTRACT Prior research implies a balance between financial and nonfinancial performance metrics (NFPM) is required to achieve differing dimensions of managerial actions for optimal firm performance. The combination providing a balance between short-term performance and long-term strategic objectives leading to improved financial performance of the firm. However, extant research is inconclusive regarding the way NFPMs influence managerial actions. In this paper, I investigate whether managerial intertemporal decisions are influenced by the application (short-term/long-term) of NFPM used in conjunction with financial measures. The paper finds empirical evidence that using short-term NFPM in conjunction with financial measures in evaluating performance is positively associated with short-term market performance. Although I found no association between long-term NFPM and either accounting-based or market-based long-term firm performance. Notwithstanding the limitations of this study, understanding the corollary between the use of specific NFPM (short-term/long-term) and specific firm performance (short-term or long-term) is important in terms of creating a “balanced scorecard” and should be of interest to firms seeking to better optimize their executive compensation contracts and better align their performance measurement systems. Keywords nonfinancial, performance measures, balanced scorecard, compensation contracts

Altered structural and functional brain network overall organization predict human intertemporal decision-making.

Intertemporal decision-making is naturally ubiquitous to us: individuals always make a decision with different consequences occurring at different moments. These choices are invariably involved in life-changing outcomes regarding marriage, education, fertility, long-term well-being, and even public policy. Previous studies have clearly uncovered the neurobiological mechanism of the intertemporal decision in the schemes of regional location or sub-network. However, it still remains unclear how to characterize intertemporal behavior with multimodal whole-brain network metrics to date. Here, we combined diffusion tensor image and resting-state functional connectivity MRI technology, in conjunction with graph-theoretical analysis, to explore the link between topological properties of integrated structural and functional whole-brain networks and intertemporal decision-making. Graph-theoretical analysis illustrated that the participants with steep discounting rates exhibited the decreased global topological organizations including small-world and rich-club regimes in both functional and structural connectivity networks, and reflected the dreadful local topological dynamics in the modularity of functional connectome. Furthermore, in the cross-modalities configuration, the same relationship was predominantly observed for the coupling of structural-functional connectivity as well. Above topological metrics are commonly indicative of the communication pattern of simultaneous global and local parallel information processing, and it thus reshapes our accounts on intertemporal decision-making from functional regional/sub-network scheme to multimodal brain overall organization.

Acute stress and altruism in younger and older adults

Recent studies of aging and decision making suggests that altruism increases with age. It is unclear, however, whether this pattern holds when choices are made under stress, as is often the case in real-world scenarios. The current study used an intertemporal choice task in which younger and older adults received a financial endowment before making a series of consequential intertemporal decisions involving gains, losses and charitable donations. Preceding the choice task, participants were exposed to a laboratory stressor. Physiological stress reactivity was a predictor of altruistic decision making in younger adults, such that individuals with higher stress reactivity made more generous choices. Older adults showed higher altruism than younger adults overall, with altruism unrelated to stress reactivity in older adults. These findings are consistent with an age-related change in the mechanisms underlying altruistic behavior.

Digital Piracy under a Graduated Response Policy

Graduated response policies (e.g., three-strikes laws) are often adopted to deter repeated criminal activity. In 2009 France passed the Hadopi three-strikes law targeting digital piracy. We model the individual intertemporal decision to engage in illegal activity before and after receiving each strike and, contingent on this decision, the level of illegal content acquisition (piracy) within each stage. We find that monitoring efforts typically believed to deter criminal activity can have unintended results. For example, an increase in the probability of detection can increase piracy. An increase in the punishment is the only policy that unambiguously deters illegal activity.