Framing and time-inconsistent preferences

Recent research on intertemporal choice (e.g., Ainslie, 1991; Herrnstein, 1990; Loewenstein & Elster, 1992) exhibits several pervasive effects that are Incompatible with the basic tenets of the "rational’ or "normative" economic theory. In particular, people show time-inconsistent preferences when asked to choose between payoffs occurring at different moments in time. Following an example from Herrnstein (1990), our first experiment demonstrates such time-inconsistent preferences. Using a present time perspective the majority of subjects portrayed a positive time preference by choosing the smaller but more immediate payoff; In contrast, when a future time perspective was employed (delaying all possible outcomes by a constant duration) most subjects portrayed a negative time preference for identical payoffs. Two additional experiments tested the robustness of this effect by (1) using an isolation procedure (Kahneman and Tversky, 1979), and (2) manipulating the certainty associated with the payoffs. Our results suggest that time-inconsistent preferences, as described by Herrnstein, can be interpreted as an analog of the certainty-effect (Kahneman & Tversky, 1979) in the time domain.