Saving is viewed as deferred consumption and studied within the framework of intertemporal choice. The literature, drawn from psychology, economics and economic psychology, suggests that whilst there have been many theoretical references to the relationship between individual differences associated with intertemporal decision-making and saving, and these individual difference variables have been studied in relation to other behaviour, there is a lack of empirical research investigating their relationship with saving. The particular variables of interest are delay of gratification, time preference (impatience), self control, impulsiveness and consideration of future consequences. This thesis presents a series of empirical studies which used carefully constructed or selected measures to investigate the relationship between individual differences associated with intertemporal decision-making and saving. A variety of methods were used. The first two studies measured delay of gratification using a behavioural choice paradigm and investigated its relationship with saving. The next three studies measured a construct known as the consideration of future consequences and examined its relationship with saving. In-depth interviews, focusing on impulsiveness and impatience provided a more realistic investigation of the personality structure of delay, and aided the development of quantitative measures of impulsiveness. Secondary analysis of Dutch panel data enabled the hypotheses to be tested with a larger dataset and shifts in assets as a measure of saving. The group of studies culminated in a postal survey of married couple households, allowing a multivariate investigation of all the individual difference constructs which had been developed and investigated. This final study also addressed issues such as the relative influence of psychological data from both spouses in a decision-making unit. The results are discussed throughout the thesis in the light of their implications for psychology, economics, policy-making and marketing, as well as for economic psychology. The main contributions are some new measures of theoretically relevant individual difference constructs, which will require further testing in order to prove their worth

This dissertation consists of three research papers on Preference models of decision making, all of which adopt an axiomatic approach in which preference conditions are studied so that the models in this dissertation can be verified by checking their conditions at the behavioral level. The first paper “Utility Functions Representing Preference over Interdependent Attributes” studies the problem of how to assess a two attribute utility function when the attributes are interdependent. We consider a situation where the risk aversion on one attribute could be influenced by the level of the other attribute in a two attribute decision making problem. In this case, the multilinear utility model—and its special cases the additive and multiplicative forms—cannot be applied to assess a subject’s preference because utility independence does not hold. We propose a family of preference conditions called nth degree discrete distribution independence that can accommodate a variety of dependencies among two attributes. The special case of second degree discrete distribution independence is equivalent to the utility independence condition. Third degree discrete distribution independence leads to a decomposition formula that contains many other decomposition formulas in the existing literature as special cases. As the decompositions proposed in this research is more general than many existing ones, the study provides a model of preference that has potential to be used for assessing utility functions more accurately and with relatively little additional effort. The second paper “On the Axiomatization of the Satiation and Habit Formation Utility Models” studies the axiomatic foundations of the discounted utility model that incorporates both satiation and habit formation in temporal decision. We propose a preference condition called shifted difference independence to axiomatize a general habit formation and satiation model (GHS). This model allows for a general habit formation and satiation function that contains many functional forms in the literature as special cases. Since the GHS model can be reduced to either a general satiation model (GSa) or a general habit formation model (GHa), our theory also provides approaches to axiomatize both the GSa model and the GHa model. Furthermore, by adding extra preference conditions into our axiomatization framework, we obtain a GHS model with a linear habit formation function and a recursively defined linear satiation function. In the third paper “Hope, Dread, Disappointment, and Elation from Anticipation in Decision Making”, we propose a model to incorporate both anticipation and disappointment into decision making, where we define hope as anticipating a gain and dread as anticipating a loss. In this model, the anticipation for a lottery is a subjectively chosen outcome for a lottery that influences the decision maker’s reference point. The decision maker experiences elation or disappointment when she compares the received outcome with the anticipated outcome. This model captures the trade-off between a utility gain from higher anticipation and a utility loss from higher disappointment. We show that our model contains some existing decision models as its special cases, including disappointment models. We also use our model to explore how a person’s attitude toward the future, either optimistic or pessimistic, could mediate the wealth effect on her risk attitude. Finally, we show that our model can be applied to explain the coexistence of a demand for gambling and insurance and provides unique insights into portfolio choice and advertising decision problems. / text

Thesis submitted by Jinrui Pan for the Degree of Doctor of Philosophy in the University of Manchester, and entitled, “Time and Risk Preferences: Theoretical Models and Applications.” Date of submission 2014.This thesis makes contributions to two important areas of behavioural economics, namely individual decision making over time and under risk. Following the Introduction, Chapter 2 presents a new discounting function for analysing intertemporal choice. Liminal discounting, the model developed here, generalises exponential discounting in a parsimonious way. It allows for well-known departures, whilst maintaining its elegance and tractability. It also can be seen as an extension of quasi-hyperbolic discounting to continuous time. A liminal discounter has a constant rate of time preference before and after some threshold time; the liminal point. A preference foundation is provided, showing that the liminal point is derived endogenously from behaviour. Chapter 3 proposes an axiomatic model featuring a differential treatment of attitudes towards risk and time. Such distinction has been strongly suggested by experimental research when studying intertemporal choice, since the future is inherently risky. In the proposed model, non-linear probability distortions are incorporated into a dynamic model with discounted utility. Time is captured by a general discounting function independent of probabilities and outcomes. Utility of outcomes is captured by standard vNM utility independent of time. A two-parameter probability weighting function captures intertemporal probabilistic risk attitudes, with one parameter being constant over time, the other being time-dependent. An index of optimism is derived that depends on both parameters, which allows to model the observed high risk tolerance for delayed lotteries. Further, a preference foundation is provided. Interestingly, the model allows behaviour to be consistent with discounted expected utility, when risk is sufficiently distant from the present.

Doctor of Philosophy / Department of Human Ecology-Personal Financial Planning / Maurice MacDonald / Clifford Robb / Americans seem to be financially vulnerable and lack sufficient net worth to overcome financial obstacles such as unforeseen medical issues, temporary job loss, or changing economic conditions. Americans aren’t saving enough, have too much debt, and tend to have a short-sighted view on their finances. Wealth is a primary indicator of financial and economic security and maintaining and improving standard of living are two important financial goals. Aggregate net worth can be used to gauge the financial well-being of Americans because it includes both assets and liabilities. It is hypothesized that part of the instability which results in the lack of accumulating adequate wealth, is time preference. Time preference is an important psychological construct which examines the ability to defer gratification. Time preference represents the intertemporal choice between immediate versus delayed utility. A low rate of time preference implies a low rate of intertemporal discounting. Individuals with low discounting do not heavily discount the future and are able to defer gratification. A high rate of time preference or a high rate of intertemporal discounting, suggests that individuals are more present oriented, heavily discount the future, prefer immediate gratification. This research study takes a unique approach to examining time preference since the experimental community lacks a clear consensus on how to best measure this construct. Standard risk and time preferences measures are typically achieved through responses to financially incentivized choice questions. Researchers have argued that incentivized choice questions may be common but they lack precision. Therefore, combining behaviors that involve intertemporal tradeoffs into a scale to measure time preference is believed to be a more accurate indicator of time preference. However, there is little research that has reliably developed and tested its use. This research examines time preference by comparing incentive choice questions as a proxy for time preference as well as an additive scale of intertemporal behaviors using a national representative sample. Regression analysis revealed that that time preference measured using an additive scale of intertemporal behaviors was significantly associated with net worth. The incentive choice questions as a measure of time preference were not significantly associated with net worth. The respondents with a high rate of intertemporal discounting as measured by the time preference scale accumulated less net-worth than respondents with a lower rate of intertemporal discounting. In addition, in the regression model when individual behaviors involving intertemporal tradeoffs such as smoking, drinking, and not taking physical exams were added as individual behaviors, the model was the preferred predictor of net worth.

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Nos últimos anos, um grande número de estudos tem investigado o consumo de cigarros com base em uma teoria que permeia uma relação entre custos e benefícios, envolvendo trocas entre consequências em curto e longo prazo, que tem sido proposta para explicar porque escolhas insalubres – incluindo exemplos nos âmbitos de poupança, procrastinação, vício e auto-confiança – ocorrem, apesar de refletirem prejuízos. Esta abordagem, aqui definida como preferência de tempo, é um fenômeno conhecido quando os benefícios estão no presente e os custos são projetados para o futuro, permeando a teoria de tomada de decisões ao longo do tempo (escolha intertemporal) – que reflete uma escolha entre uma recompensa menor imediata e uma recompensa maior atrasada. A fim de analisar a relação de escolha entre ganhos e perdas imediatos e atrasados, em diferentes contextos, e os diversos fatores que influenciam essa escolha, um questionário foi desenvolvido a partir de artigos anteriores (Kirby, 2009; Myerson et al., 2016) e aplicado a uma amostra da população de fumantes. O objetivo das análises do presente estudo baseia-se em avaliar a influência de variáveis como domínio, gênero, idade e impulsividade em cada uma das condições do questionário, chegando a conclusões a respeito da influência das mesmas, dependendo de variáveis como contexto, tipo e efeito. Os resultados do estudo comprovam que a preferência de tempo é uma medida válida para predizer o processo de tomada de decisão de consumidores de cigarros, o que significa que fumantes são mais propensos a escolher resultados imediatos em vez de resultados atrasados. Isto indica que, de modo geral, fumantes preferem recompensas imediatas do que benefícios futuros. No entanto, os resultados do estudo apontam que, sob determinadas condições, esse efeito de preferência de tempo se reduz, aumentando a propensão de escolha por resultados atrasados em vez de resultados imediatos. Estas circunstâncias foram encontradas em diferenças relacionadas ao contexto (fumo x genérico), diferenças relacionadas ao efeito de sinal (ganho x perda), diferenças em relação aos domínios (financeiro, saúde, estético e social), diferenças a cerca do modo de comprometimento de participação (pessoal x outros) e diferenças relacionadas às características demográficas dos respondentes (faixa etária e gênero). / In the last past years, a large number of studies have investigated cigarette smoking based on a theory that permeates a relationship between costs and benefits, involving trade-offs between short and long-term consequences, which has been proposed to explain why unhealthy choices, including exemples in the areas of savings, procrastination, addiction and self-confidence - occur, even though they reflect losses. This approach, here defined as time preference, is a known phenomenon when benefits are at the present and costs are projected into the future, permeating a decision-making theory over time (intertemporal choice) - which reflect a choice between a immediate but small reward and a larger but late reward. In order to analyze these choices between immediate and delayed gains and losses in different contexts, and the various factors that influence this choice, a questionnaire was developed based on previous articles (Kirby, 2009, Myerson et al., 2016) and applied into a sample of the population of smokers. The objective of the present study is to evaluate the influence of variables such as domain, gender, age and impulsivity in each of the conditions of the questionnaire, leading to conclusions about their influence, depending on variables such as context, type and effect. The results of the study prove that time preference is a valid measure to predict the decision-making process of smokers, which means that smokers are more likely to choose immediate outcomes rather than late outcomes. This indicates that, overall, smokers prefer immediate rewards than future benefits. However, the study results point out that, under certain conditions, this time preference effect is reduced, increasing the tendency to choose for delayed results rather than immediate results. These circumstances were found in differences related to the context (smoking x generic), differences related to the sign effect (gain x loss), differences in relation to the domains (financial, health, aesthetic and social), differences about the mode of commitment of participation (personal x other) and differences related to the demographic characteristics of the respondents (age rage and gender).

This dissertation, which consists of three essays, studies online auctions both theoretically and empirically. The first essay studies a special online auction format used by eBay, “Buy-It- Now” (BIN) auctions, in which bidders are allowed to buy the item at a fixed BIN price set by the seller and end the auction immediately. I construct a two-stage model in which the BIN price is only available to one group of bidders. I find that bidders cutoff is lower in this model, which means, bidders are more likely to accept the BIN option, compared with the models assuming all bidders are offered the BIN. The results explain the high frequency of bidders accepting BIN price, and may also help explain the popularity of temporary BIN auctions in online auction sites, such as eBay, where BIN option is only offered to early bidders. In the second essay, I study how bidders’ risk attitude and time preference affect their behavior in Buy-It-Now auctions. I consider two cases, when both bidders enter the auction at the same time (homogenous bidders) thus BIN option is offered to both of them, and when two bidders enter the auction at two different stages (heterogenous bidders) thus the BIN option is only offered to the early bidder. Bidders’ optimal strategies are derived explicitly in both cases. In particular, given bidders’ risk attitude and time preference, the cutoff valuation, such that a bidder will accept BIN if his valuation is higher than the cutoff valuation and reject it otherwise, is calculated. I find that the cutoff valuation in the case of heterogenous bidders is lower than that in the case of homogenous bidders. The third essay focuses on the empirical modeling of the price processes of online auctions. I generalize the monotone series estimator to model the pooled price processes. Then I apply the model and the estimator to eBay auction data of a palm PDA. The results are shown to capture closely the overall pattern of observed price dynamics. In particular, early bidding, mid-auction draught, and sniping are well approximated by the estimated price curve.

Nos últimos anos, um grande número de estudos tem investigado o consumo de cigarros com base em uma teoria que permeia uma relação entre custos e benefícios, envolvendo trocas entre consequências em curto e longo prazo, que tem sido proposta para explicar porque escolhas insalubres – incluindo exemplos nos âmbitos de poupança, procrastinação, vício e auto-confiança – ocorrem, apesar de refletirem prejuízos. Esta abordagem, aqui definida como preferência de tempo, é um fenômeno conhecido quando os benefícios estão no presente e os custos são projetados para o futuro, permeando a teoria de tomada de decisões ao longo do tempo (escolha intertemporal) – que reflete uma escolha entre uma recompensa menor imediata e uma recompensa maior atrasada. A fim de analisar a relação de escolha entre ganhos e perdas imediatos e atrasados, em diferentes contextos, e os diversos fatores que influenciam essa escolha, um questionário foi desenvolvido a partir de artigos anteriores (Kirby, 2009; Myerson et al., 2016) e aplicado a uma amostra da população de fumantes. O objetivo das análises do presente estudo baseia-se em avaliar a influência de variáveis como domínio, gênero, idade e impulsividade em cada uma das condições do questionário, chegando a conclusões a respeito da influência das mesmas, dependendo de variáveis como contexto, tipo e efeito. Os resultados do estudo comprovam que a preferência de tempo é uma medida válida para predizer o processo de tomada de decisão de consumidores de cigarros, o que significa que fumantes são mais propensos a escolher resultados imediatos em vez de resultados atrasados. Isto indica que, de modo geral, fumantes preferem recompensas imediatas do que benefícios futuros. No entanto, os resultados do estudo apontam que, sob determinadas condições, esse efeito de preferência de tempo se reduz, aumentando a propensão de escolha por resultados atrasados em vez de resultados imediatos. Estas circunstâncias foram encontradas em diferenças relacionadas ao contexto (fumo x genérico), diferenças relacionadas ao efeito de sinal (ganho x perda), diferenças em relação aos domínios (financeiro, saúde, estético e social), diferenças a cerca do modo de comprometimento de participação (pessoal x outros) e diferenças relacionadas às características demográficas dos respondentes (faixa etária e gênero). / In the last past years, a large number of studies have investigated cigarette smoking based on a theory that permeates a relationship between costs and benefits, involving trade-offs between short and long-term consequences, which has been proposed to explain why unhealthy choices, including exemples in the areas of savings, procrastination, addiction and self-confidence - occur, even though they reflect losses. This approach, here defined as time preference, is a known phenomenon when benefits are at the present and costs are projected into the future, permeating a decision-making theory over time (intertemporal choice) - which reflect a choice between a immediate but small reward and a larger but late reward. In order to analyze these choices between immediate and delayed gains and losses in different contexts, and the various factors that influence this choice, a questionnaire was developed based on previous articles (Kirby, 2009, Myerson et al., 2016) and applied into a sample of the population of smokers. The objective of the present study is to evaluate the influence of variables such as domain, gender, age and impulsivity in each of the conditions of the questionnaire, leading to conclusions about their influence, depending on variables such as context, type and effect. The results of the study prove that time preference is a valid measure to predict the decision-making process of smokers, which means that smokers are more likely to choose immediate outcomes rather than late outcomes. This indicates that, overall, smokers prefer immediate rewards than future benefits. However, the study results point out that, under certain conditions, this time preference effect is reduced, increasing the tendency to choose for delayed results rather than immediate results. These circumstances were found in differences related to the context (smoking x generic), differences related to the sign effect (gain x loss), differences in relation to the domains (financial, health, aesthetic and social), differences about the mode of commitment of participation (personal x other) and differences related to the demographic characteristics of the respondents (age rage and gender).

Nos últimos anos, um grande número de estudos tem investigado o consumo de cigarros com base em uma teoria que permeia uma relação entre custos e benefícios, envolvendo trocas entre consequências em curto e longo prazo, que tem sido proposta para explicar porque escolhas insalubres – incluindo exemplos nos âmbitos de poupança, procrastinação, vício e auto-confiança – ocorrem, apesar de refletirem prejuízos. Esta abordagem, aqui definida como preferência de tempo, é um fenômeno conhecido quando os benefícios estão no presente e os custos são projetados para o futuro, permeando a teoria de tomada de decisões ao longo do tempo (escolha intertemporal) – que reflete uma escolha entre uma recompensa menor imediata e uma recompensa maior atrasada. A fim de analisar a relação de escolha entre ganhos e perdas imediatos e atrasados, em diferentes contextos, e os diversos fatores que influenciam essa escolha, um questionário foi desenvolvido a partir de artigos anteriores (Kirby, 2009; Myerson et al., 2016) e aplicado a uma amostra da população de fumantes. O objetivo das análises do presente estudo baseia-se em avaliar a influência de variáveis como domínio, gênero, idade e impulsividade em cada uma das condições do questionário, chegando a conclusões a respeito da influência das mesmas, dependendo de variáveis como contexto, tipo e efeito. Os resultados do estudo comprovam que a preferência de tempo é uma medida válida para predizer o processo de tomada de decisão de consumidores de cigarros, o que significa que fumantes são mais propensos a escolher resultados imediatos em vez de resultados atrasados. Isto indica que, de modo geral, fumantes preferem recompensas imediatas do que benefícios futuros. No entanto, os resultados do estudo apontam que, sob determinadas condições, esse efeito de preferência de tempo se reduz, aumentando a propensão de escolha por resultados atrasados em vez de resultados imediatos. Estas circunstâncias foram encontradas em diferenças relacionadas ao contexto (fumo x genérico), diferenças relacionadas ao efeito de sinal (ganho x perda), diferenças em relação aos domínios (financeiro, saúde, estético e social), diferenças a cerca do modo de comprometimento de participação (pessoal x outros) e diferenças relacionadas às características demográficas dos respondentes (faixa etária e gênero). / In the last past years, a large number of studies have investigated cigarette smoking based on a theory that permeates a relationship between costs and benefits, involving trade-offs between short and long-term consequences, which has been proposed to explain why unhealthy choices, including exemples in the areas of savings, procrastination, addiction and self-confidence - occur, even though they reflect losses. This approach, here defined as time preference, is a known phenomenon when benefits are at the present and costs are projected into the future, permeating a decision-making theory over time (intertemporal choice) - which reflect a choice between a immediate but small reward and a larger but late reward. In order to analyze these choices between immediate and delayed gains and losses in different contexts, and the various factors that influence this choice, a questionnaire was developed based on previous articles (Kirby, 2009, Myerson et al., 2016) and applied into a sample of the population of smokers. The objective of the present study is to evaluate the influence of variables such as domain, gender, age and impulsivity in each of the conditions of the questionnaire, leading to conclusions about their influence, depending on variables such as context, type and effect. The results of the study prove that time preference is a valid measure to predict the decision-making process of smokers, which means that smokers are more likely to choose immediate outcomes rather than late outcomes. This indicates that, overall, smokers prefer immediate rewards than future benefits. However, the study results point out that, under certain conditions, this time preference effect is reduced, increasing the tendency to choose for delayed results rather than immediate results. These circumstances were found in differences related to the context (smoking x generic), differences related to the sign effect (gain x loss), differences in relation to the domains (financial, health, aesthetic and social), differences about the mode of commitment of participation (personal x other) and differences related to the demographic characteristics of the respondents (age rage and gender).

Do customers in rural and urban markets want the same thing from a restaurant server? While researchers have stressed the importance of sub-culture and made the call for empirical research, few studies have incorporated sub-culture into their research, especially within the hospitality industry. Empirically measuring the differences in sub-culture, may be especially important for restaurant operators as they serve and employ a myriad of different customers in different markets. One under researched yet critical way is through a better understanding of the importance of customer contact employees' behavior. Understanding the importance customers place on standard restaurant wait staff behaviors and time standards may be critical to earning customers satisfaction and patronage, yet few studies have empirically examined this. Developing enhanced ways of understanding how to adapt service delivery behavior to the values of major cultural groups can be extremely beneficial to hospitality managers. This study attempts to close these gaps by investigating the influence of sub-culture on consumer perceptions of behavioral and timing dimensions in a casual, full-service restaurant setting, through methodological sampling concentrating on two main sub-cultural groups: rural and urban restaurant patrons. Results indicated that sanitation and accommodation were the most important behavioral dimensions for both groups. The level of server responsiveness, friendliness, and knowledge were statistically different for the rural and urban samples. Results suggest that casual restaurant wait staff need to tailor service behavior by accommodating and customizing to the cultural and sub-cultural based guest needs in order to maintain a competitive advantage in satisfying customers. This study also demonstrates theoretical and managerial implications and suggests that further research is needed to investigate differences across other hospitality settings. / Master of Science