• Compared to Dematerialized Money, Cash Increases Impatience in Intertemporal Choice

    Author(s):
    Rod Duclos, Mansur Khamitov (see profile)
    Date:
    2019
    Group(s):
    Business Management
    Subject(s):
    Social psychology, Consumption, Economics, Business data, Theories of time and temporality
    Item Type:
    Article
    Tag(s):
    Physical form of money, intertemporal choice, financial decision-making, psychology of money, behavioural economics
    Permanent URL:
    http://dx.doi.org/10.17613/xfvw-wf11
    Abstract:
    When it comes to trading time for money (or vice versa), people tend to be impatient and myopic. Often dramatically so. For illustration, half of people would rather collect $15 now than $30 in three months. This willingness to forego 50% of the reward to skip a 3-month wait corresponds to an annual discount rate of 277%. This article investigates how money’s physical form biases intertemporal choice. We ask, what happens to (im)patience (i.e., discount rates) when time is traded against cash rather than against an equivalent sum of dematerialized money? We find that intertemporal decisions pitting time against cash (rather than against dematerialized money) increase impatience. The underlying mechanism relates to the pain of parting from money. Letting go of cash (dematerialized money) we can have now is psychologically more (less) painful, which in turn reduces (increases) our willingness to wait for larger-later payoffs. Importantly, heightening prevention focus (i.e., concerns for safety and security) moderates this bias. The article concludes by discussing the implications of the research, particularly for the psychology of saving behavior.
    Metadata:
    Published as:
    Journal article    
    Status:
    Published
    Last Updated:
    5 months ago
    License:
    Attribution-NonCommercial-NoDerivatives
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