Intertemporal Choice
Keith Marzilli Ericson, David Laibson
Handbook of Behavioral Economics / NBER · 2018
Abstract
A survey of how people trade off costs and benefits across time, contrasting the exponential-discounting benchmark with the behavioral evidence for present bias and its formal treatment via quasi-hyperbolic (β–δ) discounting.
Methodology
Review integrating theory and empirical evidence—laboratory choices, field behaviors, and neuroeconomic findings—on discounting, dynamic inconsistency, and commitment demand.
Findings
People discount the near future far more steeply than the distant future, generating time-inconsistent plans and a demand for commitment devices; the β–δ model parsimoniously captures the 'want it later, do it now' pattern that underlies procrastination and undersaving.
Applied nudge
Exploit the gap between planning and doing: let users commit their future selves in advance (scheduled saving, pre-commitment, cooling-off periods) when present-biased preferences are weakest.
Citation
Ericson, K. M., & Laibson, D. (2018). Intertemporal choice. NBER Working Paper No. 25358. In Handbook of Behavioral Economics.
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