Chapter 3: Future-oriented decisions: inter temporal choice

Question 1

What is inter temporal choice?

Answer 1

Inter temporal choice are choices that contain a trade-off among different outcomes in timing, and often in quality and quantity

Question 2

What is rational inter temporal choice?

Answer 2

Rational inter temporal choice is based on rationality, homo economicus and economic theory. People will decide based on the principle of minimizing opportunity costs

Question 3

Does an individuals degree of impatience influences the inter temporal decisions they make for money?

Answer 3

No, at least not for small amounts

Question 4

Anomaly in intermporal choice: common difference effect

Answer 4

Adding an additional delay to both options in a choice pair will increase the choice of larger later

Question 5

Anomaly in intermporal choice: Subadditive / HYPERBOLIC discounting

Answer 5

People discount more over a shorter interval. Time means more when interval is short, people have an even stronger preference for instant gratification. This is caused by interval length and not starting point!

Question 6

Anomaly in intermporal choice: the sign effect

Answer 6

The inferred value of interest is higher when choosing among delayed losses than gains

EG: ware are more likely to pay immediately because of extra loss for waiting extra long

Question 7

Anomaly in intermporal choice: The magnitude effect

Answer 7

People are more patient when deciding over larger amounts than smaller amounts

Question 8

What are framing effects in inter temporal choice?

Answer 8

Preferences can vary among identical options due to changes in the description of said options

Question 9

What is the delay/speed-up asymmetry frame?

Answer 9

1. Outcome positive, time matters more for delay than speed-up
2. Outcome negative, time matters more for speed-up than for delay

Question 10

What is the hidden zero effect frame?

Answer 10

Introducing a zero to an inter temporal choice focusses attention on the opportunity costs of each option, ultimately resulting in more people choosing large later than small sooner

Question 11

DRIFT MODEL of inter temporal choice decision-making factors is?

Answer 11

D = difference in amounts
R = ratio between amounts
I = interest rate
F = framed in financial terms
T = time difference

Question 12

What age group of people discount the most?

Answer 12

young people discount more than older people

Question 13

Is time preference related to intelligence?

Answer 13

YES! and other measures of cognitive ability