Intertemporal Decisions Research Articles

Neural Systems Underlying Individual Differences in Intertemporal Decision-making.

Excessively choosing immediate over larger future rewards, or delay discounting (DD), associates with multiple clinical conditions. Individual differences in DD likely depend on variations in the activation of and functional interactions between networks, representing possible endophenotypes for associated disorders, including alcohol use disorders (AUDs). Numerous fMRI studies have probed the neural bases of DD, but investigations of large-scale networks remain scant. We addressed this gap by testing whether activation within large-scale networks during Now/Later decision-making predicts individual differences in DD. To do so, we scanned 95 social drinkers (18-40 years old; 50 women) using fMRI during hypothetical choices between small monetary amounts available "today" or larger amounts available later. We identified neural networks engaged during Now/Later choice using independent component analysis and tested the relationship between component activation and degree of DD. The activity of two components during Now/Later choice correlated with individual DD rates: A temporal lobe network positively correlated with DD, whereas a frontoparietal-striatal network negatively correlated with DD. Activation differences between these networks predicted individual differences in DD, and their negative correlation during Now/Later choice suggests functional competition. A generalized psychophysiological interactions analysis confirmed a decrease in their functional connectivity during decision-making. The functional connectivity of these two networks negatively correlates with alcohol-related harm, potentially implicating these networks in AUDs. These findings provide novel insight into the neural underpinnings of individual differences in impulsive decision-making with potential implications for addiction and related disorders in which impulsivity is a defining feature.

Time Matters Less When Outcomes Differ: Unimodal vs. Cross-Modal Comparisons in Intertemporal Choice

Unimodal intertemporal decisions involve comparing options of the same type (e.g., apples now versus apples later), and cross-modal decisions involve comparing options of different types (e.g., a car now versus a vacation later). As we show, existing models of intertemporal choice do not allow time preference to depend on whether the comparisons to be made are unimodal or cross-modal. We test this restriction in an experiment using the delayed compensation method, a new extension of the standard method of eliciting intertemporal preferences that allows for assessment of time preference for nonmonetary and discrete outcomes, as well as for both cross-modal and unimodal comparisons. Participants were much more averse to delay for unimodal than cross-modal decisions. We provide two potential explanations for this effect: one drawing on multiattribute choice, the other drawing on construal-level theory. Data are available at https://doi.org/10.1287/mnsc.2016.2613 . This paper was accepted by Yuval Rottenstreich, judgment and decision making.

Intertemporal Decision-Making Involves Prefrontal Control Mechanisms Associated with Working Memory.

Intertemporal decision-making involves simultaneous evaluation of both the magnitude and delay to reward, which may require the integrated representation and comparison of these dimensions within working memory (WM). In the current study, neural activation associated with intertemporal decision-making was directly compared with WM load-related activation. During functional magnetic resonance imaging, participants performed an intermixed series of WM trials and intertemporal decision-making trials both varying in load, with the latter in terms of choice difficulty, via options tailored to each participant's subjective value function for delayed rewards. The right anterior prefrontal cortex (aPFC) and dorsolateral prefrontal cortex (dlPFC) showed activity modulation by choice difficulty within WM-related brain regions. In aPFC, these 2 effects (WM, choice difficulty) correlated across individuals. In dlPFC, activation increased with choice difficulty primarily in patient (self-controlled) individuals, and moreover was strongest when the delayed reward was chosen on the most difficult trials. Finally, the choice-difficulty effects in dlPFC and aPFC were correlated across individuals, suggesting a functional relationship between the 2 regions. Together, these results suggest a more precise account of the relationship between WM and intertemporal decision-making that is specifically tied to choice difficulty, and involves the coordinated activation of a lateral PFC circuit supporting successful self-control.

Anxious Individuals Are Impulsive Decision-Makers in the Delay Discounting Task: An ERP Study.

Impulsivity, which is linked to a wide range of psychiatric disorders, is often characterized by a preference for immediate but smaller rewards over delayed but larger rewards. However, debate exists on the relationship between anxiety and impulsivity. Here we use event-related potential (ERP) components as biomarkers in the temporal discounting task to examine the effect of anxiety on inter-temporal decision-making. Our behavioral results indicated that the high trait anxiety (HTA) group made significantly more immediate choices than the low trait anxiety (LTA) group. Compared with the LTA group, shorter response time was associated with immediate rewards in the HTA group. Furthermore, previous studies have demonstrated three ERP components that are associated with impulsivity and/or delay discounting. First, the N1 is an early sensory component involved in selective attention and attention processing for goal-directed actions. Second, the reward positivity (RewP) reflects reward-related dopaminergic activity and encodes reward values. Third, the P3 is regarded as a measure of motivational significance in the decision-making literature. Accordingly, this study found in the immediate-option-evoked ERPs that the HTA group had a larger N1 than the LTA group did. For the delayed-option-evoked ERPs, the HTA group had larger N1 and RewP for the immediate choice than the LTA group did, while the LTA group had a larger P3 for the delayed choice than the HTA group did. These results support the notion that anxiety individuals are impulsive decision-makers in the Delay Discounting Task.

The Effect of Future Event Markers on Intertemporal Choice Is Moderated by the Reliance on Emotions versus Reason to Make Decisions

This research examines how future event markers influence intertemporal choice, and it demonstrates across five studies that the number of salient events between a smaller-sooner and larger-later option impacts patience. The direction of the effect depends on whether the individual relies on emotion versus reason to make decisions. For those who rely on emotion, additional events increase patience. Conversely, for individuals who rely on reason, additional events decrease patience. These effects are driven by perceptions of time, as events contract perceptions of time for emotional decision makers but expand perceptions of time for rational decision makers. Implications arise for intertemporal choice, time perception, and emotional versus rational decision making.

Temptation and the efficient taxation of education and labor

AbstractThis paper studies efficient tax policies in Ramsey's tradition when consumers face temptation and self control problems in intertemporal decision making. We embed the class of preferences developed by Gul and Pesendorfer into a simple two‐period life‐cycle model and show that education should be effectively subsidized if the elasticity of the earnings function is increasing in education and if temptation problems are sufficiently severe. By contrast, if temptation problems are not sufficiently severe, efficient education policy calls for taxing education. Moreover, efficient labor taxation calls for subsidizing qualified labor if the strength of temptation is sufficiently large.

The Attraction Effect Modulates Reward Prediction Errors and Intertemporal Choices

Classical economic theory contends that the utility of a choice option should be independent of other options. This view is challenged by the attraction effect, in which the relative preference between two options is altered by the addition of a third, asymmetrically dominated option. Here, we leveraged the attraction effect in the context of intertemporal choices to test whether both decisions and reward prediction errors (RPE) in the absence of choice violate the independence of irrelevant alternatives principle. We first demonstrate that intertemporal decision making is prone to the attraction effect in humans. In an independent group of participants, we then investigated how this affects the neural and behavioral valuation of outcomes using a novel intertemporal lottery task and fMRI. Participants9 behavioral responses (i.e., satisfaction ratings) were modulated systematically by the attraction effect and this modulation was correlated across participants with the respective change of the RPE signal in the nucleus accumbens. Furthermore, we show that, because exponential and hyperbolic discounting models are unable to account for the attraction effect, recently proposed sequential sampling models might be more appropriate to describe intertemporal choices. Our findings demonstrate for the first time that the attraction effect modulates subjective valuation even in the absence of choice. The findings also challenge the prospect of using neuroscientific methods to measure utility in a context-free manner and have important implications for theories of reinforcement learning and delay discounting. <b>SIGNIFICANCE STATEMENT</b> Many theories of value-based decision making assume that people first assess the attractiveness of each option independently of each other and then pick the option with the highest subjective value. The attraction effect, however, shows that adding a new option to a choice set can change the relative value of the existing options, which is a violation of the independence principle. Using an intertemporal choice framework, we tested whether such violations also occur when the brain encodes the difference between expected and received rewards (i.e., the reward prediction error). Our results suggest that neither intertemporal choice nor valuation without choice adhere to the independence principle.

Neural Systems Underlying Individual Differences in Intertemporal Decision-making

Neural Systems Underlying Individual Differences in Intertemporal Decision-making

Mental Time Travel and the Valuation of Financial Investments

Purpose To portray the valuation of financial investments as mental time travel. Design/methodology/approach In a series of thought investments, $1 invested in an investment fund is mentally projected forward in time and then discounted back to the present – with no objective time passing. The thought investments feature symmetric valuation (in which discount rates exactly match projection rates) and asymmetric valuation (in which discount rates and projection rates happen to differ). They show how asymmetric valuation can result in differences between the current personal value and market value of an investment and, by way of real-world illustration, between a closed-end investment fund’s net asset value and its market value. We explore possible reasons for asymmetric valuation. Findings Thought investments illustrating mental time travel can be used to help understand both financial investment valuation generally and, more specifically, established explanations of the closed-end investment fund puzzle. We show how different expectations, different perceptions of time and risk and different risk and time preferences might help determine value. Originality There are vast literatures on prospection, discounting and future-orientated or intertemporal decision-making. Our innovation is to illustrate how these mental activities might combine to facilitate financial investment valuation. In particular, we show that a low personal discount rate could be a consequence of a shortened perception of future time and vice versa.

Reduced future-oriented decision making in individuals with subjective cognitive decline: A functional MRI study

IntroductionSubjective cognitive decline (SCD) refers to an at-risk state of Alzheimer's disease and subtle cognitive deficits that have been observed in this condition. Currently, it is unknown whether complex cognitive processes relevant to everyday life, such as future-oriented choice behavior, are also altered in SCD. MethodsTwenty SCD participants and 24 control (CO) participants took part in a functional magnetic resonance imaging task on intertemporal decisions, with and without simultaneous episodic future imagination. ResultsSCD participants showed reduced future-oriented choices. Future imagination increased future-oriented choices and was associated with increased brain activation in medial frontal polar cortex, right insular cortex, and anterior cingulate cortex in CO only, not SCD. In addition, more future-oriented choices were associated with hippocampal activation during choice processing in CO only. DiscussionSubtle neuronal network disruptions in SCD may underlie their myopic future decisions and lack of modulation of choice behavior by episodic future imagination.

Inventory replenishment policy for the decision maker with present-biased preference and time-inconsistency under inflation

Due to bounded rationality, people often rush for instantaneous gratification if the decisions involve immediate rewards, but procrastinate if the decisions involve immediate costs. Present-biased preference and time-inconsistency will be more salient when people are making inter-temporal decisions to trade off rewards and costs in the future. People outweigh the present and their preference for the outcome in the future will decline over time. Incorporating present-biased preference and time-inconsistency under quasi-hyperbolic discounting, time value of money under inflation and time-varying demand with shortages completely backlogged, we develop an inventory replenishment model for a deteriorating item. Inventory replenishment policies that benefit the decision maker are as follows. With the increase of time-inconsistency, one can increase ordering number and decrease fraction of shortages; with the increase of hazard rate within an upper limit, one can increase ordering number and decrease fraction of shortage; with the increase of compounded discount rate, one can increase ordering number and fraction of shortage. Hyperbolic discounting increases the ordering number and decreases the final profit, and the degree of hyperbolic discounting strengthens such outcomes. As a result, the optimal policy for a decision maker is to keep as rational as possible when making inter-temporal decisions.

Consumption adaptation, anticipation-bias, and optimal income taxation

Adaptation is omnipresent but people systematically fail to correctly anticipate the degree to which they adapt, leading them to make irrational intertemporal decisions. This paper concerns optimal ...

The Attraction Effect Modulates Reward Prediction Errors and Intertemporal Choices.

Many theories of value-based decision making assume that people first assess the attractiveness of each option independently of each other and then pick the option with the highest subjective value. The attraction effect, however, shows that adding a new option to a choice set can change the relative value of the existing options, which is a violation of the independence principle. Using an intertemporal choice framework, we tested whether such violations also occur when the brain encodes the difference between expected and received rewards (i.e., the reward prediction error). Our results suggest that neither intertemporal choice nor valuation without choice adhere to the independence principle.

Impacts of religious semantic priming on an intertemporal discounting task: Response time effects and neural correlates

The purpose of this study is to test the hypothesis that religious primes would influence intertemporal discounting behaviors in neurotypical older adults, but not in participants with Parkinson's disease (PD). Furthermore, we predicted that this priming effect would be related to functional connectivity within neural networks mediating religious cognition, decision-making, reward valuing, and prospection processes. Contrary to past research with young adults, we found a significant positive relationship between religiosity and discounting rates. Religious semantic primes did not reliably shift individual discounting rates. But religious controls did respond more quickly to intertemporal decisions under the religious priming condition than the neutral condition, compared to response time differences among the participants with PD. Differences in response time were significantly associated with functional connectivity between the nucleus accumbens and various regions, including the left anterior cingulate cortex and Brodmann areas 10 and 46 in the right dorsolateral prefrontal cortex. These results suggest that religious primes influence discounting behavior via dopaminergic meso-limbic and right dorsolateral prefrontal supporting cognitive valuation and prospection processes.

Modeling the interaction between flooding events and economic growth

Recently socio-hydrology models have been proposed to analyze the interplay of community risk-coping culture, flooding damage and economic growth. These models descriptively explain the feedbacks between socio-economic development and natural disasters such as floods. Complementary to these descriptive models, we develop a dynamic optimization model, where the inter-temporal decision of an economic agent interacts with the hydrological system. We assume a standard macro-economic growth model where agents derive utility from consumption and output depends on physical capital that can be accumulated through investment. To this framework we add the occurrence of flooding events which will destroy part of the capital. We identify two specific periodic long term solutions and denote them rich and poor economies. Whereas rich economies can afford to invest in flood defense and therefore avoid flood damage and develop high living standards, poor economies prefer consumption instead of investing in flood defense capital and end up facing flood damages every time the water level rises like e.g. the Mekong delta. Nevertheless, they manage to sustain at least a low level of physical capital. We identify optimal investment strategies and compare simulations with more frequent, more intense and stochastic high water level events.

An Italian translation and validation of the Consideration of Future Consequences-14 Scale

Research on intertemporal decision-making has often used Strathman, Gleicher, Boninger, and Edwards's (1994) 12-item consideration of future consequences scale, or the CFC-14 scale (Joireman, Shaffer, Balliet, & Strathman, 2012). The present studies examined the measurement properties of an Italian CFC-14 scale, and the utility of distinguishing between its two subscales (consideration of future and consideration of immediate consequences). In Study 1 (N=832 adolescents, 964 adults), exploratory factor analyses suggested two factors and confirmatory factor analyses indicated the two-correlated factors and bi-factor models fit the data well. Study 2 (N=152 undergraduates) assessed the relationship between the two scales with Zimbardo and Boyd's time perspective inventory and revealed a high 8-week test-retest reliability (>0.74). Study 3 (N=432 adolescents) revealed CFC-Immediate scores did not differ as a function of age, whereas CFC-Future scores were higher among adolescents 16 and older. Study 4 (N=235 adolescents, 235 adults) revealed that adolescents and adults did not differ on CFC-Immediate, but adults scored significantly higher than adolescents on CFC-Future. Results support the validity of the Italian CFC-14, and provide insight into the developmental trajectory of time orientation, wherein adolescents and adults differ in concern with future (but not immediate) orientation.

Dopamine Modulation of Intertemporal Decision-making: Evidence from Parkinson Disease

Choosing between smaller prompt rewards and larger later rewards is a common choice problem, and studies widely agree that frontostriatal circuits heavily innervated by dopamine are centrally involved. Understanding how dopamine modulates intertemporal choice has important implications for neurobiological models and for understanding the mechanisms underlying maladaptive decision-making. However, the specific role of dopamine in intertemporal decisions is not well understood. Dopamine may play a role in multiple aspects of intertemporal choices--the valuation of choice outcomes and sensitivity to reward delays. To assess the role of dopamine in intertemporal decisions, we tested Parkinson disease patients who suffer from dopamine depletion in the striatum, in either high (on medication, PDON) or low (off medication, PDOFF) dopaminergic states. Compared with both PDOFF and healthy controls, PDON made more farsighted choices and reduced their valuations less as a function of increasing time to reward. Furthermore, reduced discounting in the high dopaminergic state was robust across multiple measures, providing new evidence for dopamine's role in making decisions about the future.

Product Pricing in a Peer-to-Peer Economy

The emergence of a collaborative economy has been driven by advances in information technology that allow consumers to borrow and rent goods among peers on a secondary sharing market. In a dynamic setting, consumers make intertemporal decisions about purchases and their participation in the sharing market. This study introduces an overlapping-generations model to analyze product pricing and consumer choice with and without a sharing market. The model quantifies the impacts of a peer-to-peer economy on the demand for ownership, the product price, and all participants’ payoffs, including consumer surplus, profits, and social welfare. Given consumers that are heterogeneous with respect to their consumption needs and valuations, it illustrates which of them are prone to participate in a sharing economy and whether a retailer (or manufacturer) can benefit from the presence of a secondary exchange. A sharing market tends to increase the price of new products by a “sharing premium,” which positively depends on the retailer’s commitment ability. The price increment becomes relatively smaller for higher-cost products. Low-cost products and sufficiently impatient consumers together make a peer-to-peer economy unattractive for retailers. For high-cost products, however, the latter stand to gain from the existence of a sharing market. Most important, the introduction of a peer-to-peer economy increases both consumer surplus and social welfare, thus creating an implicit imperative for a social planner to help promote collaborative consumption, for instance, by providing incentives for retailers and manufacturers that tend to offset possible expected negative payoff effects from consumer sharing.

Time Discounting in the Presence of Time Constraints

This study explores the intertemporal choice of goods with a limited time to enjoy it. Compared to previous research showing that time preferences in intertemporal decisions have a decreasing hyperbolic function, we investigate time preferences when there are time constraints, or expirations, to consume goods. The experiment tested two types of these goods, gift certificate and food. The results show that the time discount rate in the presence of a time limit is increasing over time.

Thinking Outside the Euclidean Box: Riemannian Geometry and Inter-Temporal Decision-Making.

Inter-temporal decisions involves assigning values to various payoffs occurring at different temporal distances. Past research has used different approaches to study these decisions made by humans and animals. For instance, considering that people discount future payoffs at a constant rate (e.g., exponential discounting) or at variable rate (e.g., hyperbolic discounting). In this research, we question the widely assumed, but seldom questioned, notion across many of the existing approaches that the decision space, where the decision-maker perceives time and monetary payoffs, is a Euclidean space. By relaxing the rigid assumption of Euclidean space, we propose that the decision space is a more flexible Riemannian space of Constant Negative Curvature. We test our proposal by deriving a discount function, which uses the distance in the Negative Curvature space instead of Euclidean temporal distance. The distance function includes both perceived values of time as well as money, unlike past work which has considered just time. By doing so we are able to explain many of the empirical findings in inter-temporal decision-making literature. We provide converging evidence for our proposal by estimating the curvature of the decision space utilizing manifold learning algorithm and showing that the characteristics (i.e., metric properties) of the decision space resembles those of the Negative Curvature space rather than the Euclidean space. We conclude by presenting new theoretical predictions derived from our proposal and implications for how non-normative behavior is defined.