Intertemporal Decision-Making: Economic and Cognitive Perspectives

Intertemporal decision-making is a fundamental issue in the study of individual behavior. In this paper I review the economic approach to intertemporal decision-making by considering the behavioral assumptions that are implied by the Exponential and the Hyperbolic discounting models. Both approaches focus on how people evaluate utility ‡ows over time. However, there is evidence showing that there also exist cognitive constraints that do not change the evaluation of utility over time and yet they a¤ect the intertemporal behavior of people. This evidence suggests that a cognitive perspective can be useful for improving our understanding of intertemporal decision-making