Framing Effects in Intertemporal Choice Tasks and Financial Implications
42 Pages Posted: 5 Mar 2012 Last revised: 21 Aug 2015
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: Suggested Citation
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