Magnitude effect in intertemporal allocation tasks
Sun,Chen Potters,Jan
Sun,Chen
Potters,Jan
Abstract
Intertemporal choices are affected by both discount rate and utility curvature. We investigate how the two aspects of time preference are affected by the size of the total budget using an intertemporal allocation task. At the aggregate level as well as at the individual level, we find magnitude effects both on the discount rate and on intertemporal substitutability (i.e., utility curvature). Individuals are more patient when dealing with larger budgets and also regard larger budgets to be more fungible. The latter effect suggests that the degree of asset integration is increasing in the stake.
Description
Date
2022-04
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Time preference, Magnitude effect, Convex Time Budget method, Asset integration, RISK-AVERSION, TIME-PREFERENCES, CHOICE, CONSISTENCY, UNCERTAINTY, ATTITUDES, ANOMALIES, UTILITY, C91 - Laboratory, Individual Behavior, D12 - Consumer Economics: Empirical Analysis, D91 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
Citation
Sun, C & Potters, J 2022, 'Magnitude effect in intertemporal allocation tasks', Experimental Economics, vol. 25, no. 2, pp. 593-623. https://doi.org/10.1007/s10683-021-09723-w