Negative Time Preference

  • Loewenstein G
  • Prelec D
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Planning for the future invariably requires one to choose among alternative sequences of outcomes. Even simple shortterm scheduling decisions about work, play, chores, vacations, etc., involve choosing between sequences, because events that take up time cannot be rescheduled without changing the timing of other activities. Most economic analyses of preferences between temporally spaced sequences rely on the discounted utility model, along with the assumption of positive time preference and diminishing marginal utility.1 Barring any preferential interactions across different time periods, the predictions of this model for determining the optimal sequencing of a given set of events are simple: Place the best event at the start, then proceed in descending order until the worst event is reached at the end. Thus a declining series of consumption levels ought to be preferable to an increasing series, holding total consumption constant. In this paper, we present a short selection of findings (reported more fully in our 1990 paper) that sharply contradict the normative sequencing rule just described. To most persons, a deteriorating series of utility levels is a rather close approximation to the least attractive of all possible patterns, regardless of the nature of events that are being ordered. As a secondary violation of the discounted utility model, the preferences of many people are not additive. Such additivity violations often reflect a concern for spreading utility levels evenly over time that is not attributable to diminishing marginal utility within periods.

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  • George Loewenstein

  • Drazen Prelec

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