Is a bird in the hand worth two in the future? The neuroeconomics of intertemporal decision-making

Progress in Neurobiology
Tobias Kalenscher, Cyriel M A Pennartz

Abstract

When making intertemporal decisions, i.e., decisions between outcomes occurring at different instants in time, humans and animals prefer rewards with short-term availability over rewards that become available in the long run. Discounted utility theory (DUT) is an influential normative model for intertemporal decisions that attempts to capture preference over time. It prescribes which is the best decision to take with respect to consistent, coherent and optimal choice. Over the last few decades, DUT's descriptive validity has been critically challenged. Empirical studies found systematic violations of several of DUT's assumptions, including time-consistency of preferences, stationarity, constant discounting and utility maximisation. To account for these anomalies, alternative models have been devised in various academic disciplines, including economics, psychology, biology, philosophy, and most lately, cognitive neuroscience. This article reviews the most recent literature on the behavioural and neural processes underlying intertemporal choices, and elucidates to which extent these findings can be used to explain violations of DUT's assumptions. In the first three sections, DUT is introduced, and behavioural anomalies are discus...Continue Reading

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