Framing Effects in Intertemporal Choice Tasks and Financial Implications

42 Pages Posted: 5 Mar 2012 Last revised: 21 Aug 2015

See all articles by Wolfgang Breuer

Wolfgang Breuer

RWTH Aachen University

Can Kalender Soypak

RWTH Aachen University - Chair for Business Administration, particularly Business Finance

Date Written: August 21, 2015

Abstract

In this paper, we examine differences in choice patterns between delay and speedup frames and refer to these differences in choice tasks as time framing effects. Framing effects in choice tasks seem to be less significant than corresponding framing effects in matching tasks and this result seems to be in line with the conclusions of previous studies. More interestingly, we also find that time framing effects are stronger for questions involving negative outcomes. We explain this experimental result by distinguishing between out-of-pocket costs incurred by delaying fines and opportunity costs from speeding up rewards with the latter costs being less disturbing than the former. In order to validate our theory, we also investigate borrowing and lending decisions of private households via a panel analysis across 54 countries empirically and show that household behavior is in line with our theory.

Keywords: experiments; household decision making; discounting; framing; preference reversals

JEL Classification: D91, C91

Suggested Citation

Breuer, Wolfgang and Soypak, Can Kalender, Framing Effects in Intertemporal Choice Tasks and Financial Implications (August 21, 2015). Available at SSRN: https://ssrn.com/abstract=2016069 or http://dx.doi.org/10.2139/ssrn.2016069

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Can Kalender Soypak (Contact Author)

RWTH Aachen University - Chair for Business Administration, particularly Business Finance ( email )

Templergraben 55
52056 Aachen, 52056
Germany

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