NDLI: Choosing monetary sequences: theory and experimental evidence

Content Provider	Springer Nature Link
Author	Manzini, Paola Mariotti, Marco Mittone, Luigi
Copyright Year	2010
Abstract	We formulate and investigate experimentally a model of how individuals choose between time sequences of monetary outcomes. The model assumes that a decision maker uses, sequentially, two criteria to screen options. Each criterion only permits a decision between some pairs of options, while the other options are incomparable according to that criterion. When the first criterion is not decisive, the decision maker resorts to the second criterion to select an alternative. We find that: (1) traditional economic models based on discounting alone cannot explain a significant (almost 30%) proportion of the data no matter how much variability in the discount functions is allowed; (2) our model, despite considering only a specific (exponential) form of discounting, can explain the data much better solely thanks to the use of the secondary criterion; (3) our model explains certain specific patterns in the choices of the “irrational” people. We reject the hypothesis that anomalous behavior is due simply to random “mistakes” around the basic predictions of discounting theories: deviations are not random and there are clear systematic patterns of association between “irrational” choices.
Starting Page	327
Ending Page	354
Page Count	28
File Format	PDF
ISSN	00405833
Journal	Theory and Decision
Volume Number	69
Issue Number	3
e-ISSN	15737187
Language	English
Publisher	Springer US
Publisher Date	2010-05-11
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Time preference Time sequences Negative discounting Operations Research/Decision Theory Methodology of the Social Sciences Game Theory, Economics, Social and Behav. Sciences Game Theory/Mathematical Methods Economic Theory
Content Type	Text
Resource Type	Article
Subject	Arts and Humanities Economics, Econometrics and Finance Developmental and Educational Psychology Social Sciences Decision Sciences Applied Psychology Computer Science Applications

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