The Psychology of Intertemporal Preferences

Abstract

Recently, there have been reviews focusing on the neurological underpinning of intertemporal. This chapter talks about the psychological foundation of intertemporal decisions and the consequences for people's decisions and behaviors. The emphasis is on recent developments in uncovering the psychology underlying intertemporal preferences, understanding differences in discount rates across people and contexts, and using discounting to understand a broad range of intertemporal decisions and behaviors. The chapter particularly examines the basic effects in the context of the different psychological mechanisms proposed in the literature. It concludes by pointing to open questions and the need to improve mapping of the match between the multiple psychological drivers and the types of intertemporal decisions they predominantly govern. The mechanisms covered range from emotion-based to various cognitive-based accounts and focus on the outcomes relevant to the choice, future self, perception of resources and opportunity costs, and perception of the time horizon relevant to choice.

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