Description
Recent studies in psychology suggest that linear index models of attribute-based heuristic outperform structural models of discounted utility in predicting intertemporal choices. We uncover the connection between the two by deriving an additively separable function of attribute-by-attribute comparisons from the reduced form of structural discounted utility specifications. Our empirical observations reveal that the comparison in the money attribute aligns with choosing between utility functions, while in the time attribute, it corresponds to a choice between discounting functions. Our analysis further reveals a connection between the intercept of the heuristics’ linear model and the present bias parameter in quasi-hyperbolic discounting. We further contribute to the literature by demonstrating that the combination with a family of CARA utility function renders discounting functions to exhibit magnitude-dependent declining discount rates —even when the discount function is chosen to be exponential. Building on the linkage, this study shows that the combination of different approaches to evaluating monetary payoffs and their time deliveries adopted by heuristic models imply preference heterogeneity that can be represented by a finite mixture model of two distinct discounted utility frameworks. These findings pave the way for a richer understanding of intertemporal decision-making and offer a unified perspective on heuristic and structural models.| Period | 11 Sept 2025 |
|---|---|
| Held at | Copenhagen Business School, Denmark |