The Discounted Utility model has, historically, been regarded as the appropriate model of how people make choices between intertemporal prospects (e.g., between receiving some amount of money today versus that amount of money plus interest at some future date.) However, there is abundant evidence that actual behavior systematically departs from the predictions of the model. A variety of alternatives have been proposed in the literature. Some of these depart from Discounted Utility's assumption of exponential discounted while others assume that intertemporal choices are made based on the application of simple decision heuristics. In this research project, the PI (in close cooperation with Dr. Jeffrey R. Steven's lab at the Center for Adaptive Behavior and Cognition at the Max Planck Institute for Human Development, Germany) will develop full-fledged probabilistic specifications of competing theories for intertemporal choice and apply quantitative methods immune from aggregation artificacts to test their relative veracity.
Intertemporal choices underlie many of society's most pressing decisions, from collective decisions such as global climate change and the war on obesity to more personal decisions such as consuming alcohol and investing in retirement plans. Virtually all decisions we make have a temporal component. This makes intertemporal choice relevant across a broad range of disciplines (e.g., economics, psychology, biology, neuroscience, finance, medicine, environmental science). Despite the extensive interest in this topic, there still is a critical gap in our knowledge of how individuals make intertemporal choices. The research proposed in this application is significant because it will allow us to investigate the different cognitive processes that individuals use when making intertemporal choices. Equally significant is the question of interindividual differences. Rather than dismissing variation as noise in the data, we expect to show strong qualitative differences among different people. In terms of broader impacts, this may allow simple ``nudges'' to help people make better decisions by customizing individual decision scenarios to focus on the long-term benefits of a healthy lifestyle, a secure financial future, and environmental stewardship. The scientific findings will impact future training of basic and applied decision scientists. By eliminating major sources of artifacts, the project can help improve all levels of societal decision making in the future.
