Intertemporal Decisions
intertemporal decisions
In attempt to outline the standard economic theory about how people make intertemporal decisions we must first begin by looking at what intertemporal decision are, using examples to receive a clear understanding of the full concept. Once we have a distinguished understanding of intertemporal choice we must then look berifly at the economic and psycholigical history which formed this concept and ultimatally lead to the theory of discounting utility. It is then that we will proceed to examine the discount utility model, or the DU model as we will refear to it.
Intertemporal choice once defined by Senior as "It may be said that pure abstinence, being a mere negation, cannot produce positive effects; the same remark might as well be applied to intrepidity, or even to liberty; but who ever objected to their being considered as equivalent to active agents? To abstain from the enjoyment which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will. It is true that such exertions are made, and indeed are frequent in every state of society, except perhaps in the very lowest, and have been made in the very lowest, for society could not otherwise have improved; but of all the means by which man can be raised in the scale of being, abstinence, as it is perhaps the most effective, is the slowest in its increase, and the least generally diffused." (Senior, 2002). Intertemporal choice attempts to explain the rational for impulsive vs prolonged consumption by companies, governments and individuals. Laibson in a lecture given in Harvard attempts to simplify this concept with the example of a massage treatements at a spa complex. He considers this a motivating experiment, or a thought experiment. He asks the clas to display a show of hands for their choice. He first questions that when arriving at the spa resort is giving the option of a 15 minute masage now or a 20
In attempt to outline the standard economic theory about how people make intertemporal decisions we must first begin by looking at what intertemporal decision are, using examples to receive a clear understanding of the full concept. Once we have a distinguished understanding of intertemporal choice we must then look berifly at the economic and psycholigical history which formed this concept and ultimatally lead to the theory of discounting utility. It is then that we will proceed to examine the discount utility model, or the DU model as we will refear to it.
Intertemporal choice once defined by Senior as "It may be said that pure abstinence, being a mere negation, cannot produce positive effects; the same remark might as well be applied to intrepidity, or even to liberty; but who ever objected to their being considered as equivalent to active agents? To abstain from the enjoyment which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will. It is true that such exertions are made, and indeed are frequent in every state of society, except perhaps in the very lowest, and have been made in the very lowest, for society could not otherwise have improved; but of all the means by which man can be raised in the scale of being, abstinence, as it is perhaps the most effective, is the slowest in its increase, and the least generally diffused." (Senior, 2002). Intertemporal choice attempts to explain the rational for impulsive vs prolonged consumption by companies, governments and individuals. Laibson in a lecture given in Harvard attempts to simplify this concept with the example of a massage treatements at a spa complex. He considers this a motivating experiment, or a thought experiment. He asks the clas to display a show of hands for their choice. He first questions that when arriving at the spa resort is giving the option of a 15 minute masage now or a 20
Bibliography: N.W. Senior, (2002). "An outline of the science of political economy". University Pre of the Pacific. S.Frederick, G.Loewenstein, and T.O 'donoghue, "Time discounting and time preference : a critical reveiw" McClure, Ericson, D.Laibson, G.Loewenstein, and Cohen. (2007) "extreamly thirsty subjects" Read, and Von Leeuwen (1998) Read, G.Loewenstein, and Kalyanaraman (1999) Parfit (1971) D.Laibson, Lecture Samuelson (1952) Koopmans (1960)