Anomalies in Intertemporal Choice: Evidence and an Interpretation.

Research on decision-making under uncertainty has been strongly influenced.by the documentation of numerous expected utility anomalies--behaviors that violate the expected utility axioms. The relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility anomalies. The authors enumerate a set of discounted utility anomalies analogous to the expected utility anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with discounted utility. They discuss implications for savings behavior, estimation of discount rates, and choice framing effects. Copyright 1992, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.