Applications of the Savage Test to Intertemporal “Anomalies”
This paper suggests that the tenets of the discounted utility model (DU) don’t appeal to most intelligent adults. When experimental circumstances facilitated direct comparison of discount rates across outcomes differing in valence, magnitude, and delay, respondents did not coordinate responses. Indeed, two of the so-called “anomalies” (the magnitude effect and the sign effect) were more pronounced under these conditions. Respondents who thought more deeply about their pattern of responses diverged further from the dictates of the theory. On the view that normative models draw support from the reflective equilibrium of intelligent individuals, these results undermine the normative validity of DU.
Citation:
Shane Frederick and Daniel Read (2009) ,"Applications of the Savage Test to Intertemporal “Anomalies”", in NA - Advances in Consumer Research Volume 36, eds. Ann L. McGill and Sharon Shavitt, Duluth, MN : Association for Consumer Research, Pages: 139-142.
Authors
Shane Frederick, Massachusetts Institute of Technology, USA
Daniel Read, Durham University, UK
Volume
NA - Advances in Consumer Research Volume 36 | 2009
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