Despite various studies examining intertemporal choice with hypothetical rewards due to problematic real reward delivery, there remains no substantial evidence on the effect of the incentives on the decision confidence and cognitive process in intertemporal choice and no comprehensive exploration on the loss domain. Hence, this study conducts an eye-tracking experiment to examine the effect of incentive approach and measure participants' decision confidence using a between-subject design in both gain and loss domains. Results replicated previous findings which show incentives do (...) not affect intertemporal choice in the gain domain. In contrast, in the loss domain, participants in the incentivized group were more likely to choose the larger-later options than those in the non-incentivized group. Furthermore, the decision confidence and the mean fixation duration differed between the incentivized and non-incentivized groups in both gain and loss domains. These findings allow for a better understanding of the effect of incentives on intertemporal choice and provide valuable information for the design of incentives in future intertemporal experiments. (shrink)

Models of intertemporal choice draw on three evaluation rules, which we compare in the restricted domain of choices between smaller sooner and larger later monetary outcomes. The hyperbolic discounting model proposes an alternative-based rule, in which options are evaluated separately. The interval discounting model proposes a hybrid rule, in which the outcomes are evaluated separately, but the delays to those outcomes are evaluated in comparison with one another. The tradeoff model proposes an attribute-based rule, in which both outcomes and delays (...) are evaluated in comparison with one another: People consider both the intervals between the outcomes and the compensations received or paid over those intervals. We compare highly general parametric functional forms of these models by means of a Bayesian analysis, a method of analysis not previously used in intertemporal choice. We find that the hyperbolic discounting model is outperformed by the interval discounting model, which, in turn, is outperformed by the tradeoff model. Our cognitive modeling is among the first to offer quantitative evidence against the conventional view that people make intertemporal choices by discounting the value of future outcomes, and in favor of the view that they directly compare options along the time and outcome attributes. (shrink)

In this paper, we investigate some implications of recent results about salience on loan decisions. Using the framework of focus-weighted utility we show that consumers might take out loans even when that yield them negative utility due to the focusing bias. We suggest, however, that this can be counterbalanced and consumers might be more prudent in their decisions and less likely to take out such loans when the usual fixed-installments plan is coupled with an equivalent decreasing-installments option. Moreover, we show (...) that this is true even for loans with prepayment options or when borrowers take default into consideration. We argue that harmful loan consumption could be decreased if a policy would prescribe presentation of loan repayment schedules in a way that employs this effect. (shrink)

Time preference reversals refers to systematic inconsistencies between preferences and valuations in intertemporal choice. When faced with a pair of intertemporal options, people preferred the smaller-sooner option but assign a higher price to the larger-later one. Different hypotheses postulate that the differences in evaluation scale or output format between the choice and the bid tasks cause the preference reversal. However, these hypotheses have not been distinguished. In the present study, we conducted a hybrid task, which shares the same evaluation scale (...) with the bid task and shares the same output format with the choice task. By comparing these three tasks, we can figure out the key reason for time preference reversal. The eye-tracking measures reflecting attention allocation, cognitive effort and information search pattern were examined. Results showed that participants' time preference and eye-tracking measures in the hybrid task were similar to those in the choice task, but different from those in the bid task. Our findings suggest that the output format is the core reason for time preference reversal and may deepen our understanding of the mechanisms that underlie time preference reversal. (shrink)