Beyond Myopia: Scarcity and Intertemporal Choice Reversals

Abstract

It is widely understood that scarcity focuses people on “here and now” problems, causing myopic, impulsive decisions. Our work challenges this basic premise and asks whether scarcity can ever lead to increased patience. We suggest that existing work that has inadvertently conflated resource scarcity with threatened needs that are temporally proximal. By disaggregating the role of scarcity and the temporal proximity of needs, we demonstrate the novel finding that scarcity can increase preferences for larger, later outcomes. Three preregistered, incentive compatible experiments demonstrate that the relationship between scarcity and intertemporal choice is more complex than previously understood. In addition to demonstrating a reversal of typical intertemporal preferences under scarcity, our findings offer a new interpretation of existing findings and suggest that responses to scarcity may be more in line with standard economic theory than currently believed.

Keywords: scarcity, myopia, intertemporal choice, financial decision making, economic psychology, discount rates, money

JEL Classification: D1, M, G4, G5