Philosophical Transactions of the Royal Society B: Biological Sciences
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Intangibility in intertemporal choice

Scott Rick

Scott Rick

Department of Operations and Information Management, The Wharton School, University of PennsylvaniaPhiladelphia, PA 19104, USA

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and
George Loewenstein

George Loewenstein

Department of Social and Decision Sciences, Carnegie Mellon UniversityPittsburgh, PA 15213, USA

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    Since the advent of the discounted utility (DU) model, economists have thought about intertemporal choice in very specific terms. DU assumes that people make explicit trade-offs between costs and benefits occurring at different points in time. While this explicit trade-off perspective is simple and tractable, and has stimulated productive research, it does not provide a very realistic representation of a wide range of the most important intertemporal trade-offs that people face in daily life. If one considers the most important and commonly discussed examples of intertemporal choices, a striking pattern emerges: in almost all cases, early outcomes tend to be concrete (e.g. purchasing this latte), but later outcomes tend to be much less tangible (e.g. the unknown item that could have been purchased later with the money spent on this latte). We propose that people rely on anticipatory emotions as a proxy for intangible outcomes when trade-offs are implicit. This paper reviews neuroeconomic evidence that has begun to elucidate the role of anticipatory emotions in decisions involving intangible outcomes. Although most progress has been made in the domain of spending and saving, we discuss how the existing neuroeconomic research could be extended to other domains where trade-offs are ill defined.

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