The Psychology of Intertemporal Preferences

Abstract

The focus in this chapter is on the psychological foundation of intertemporal decisions and the consequences for people’s decisions and behaviors. Rather than simply update the numerous excellent past reviews with a focus on the discounting phenomena, the emphasis in this chapter 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 current chapter will therefore mainly focus on recent empirical findings with an emphasis on the psychological mechanisms underlying these findings. In particular, we examine the basic effects in the context of the different psychological mechanisms proposed in the literature. We conclude by pointing to open questions and the need to better map the match between the multiple psychological drivers and the types of intertemporal decisions they predominantly govern.