Compared to Dematerialized Money, Cash Increases Impatience in Intertemporal Choice

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 3 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.

Credit card cue effect

“…These credit-card stimuli or cues activate the concept of credit cards in consumers’ minds and research on priming indicates that such activation spreads to other related concepts, thereby unconsciously influencing subsequent perceptions, thoughts and behaviors (Bargh and Chartrand, 2000). Consistent with such effects, researchers have found that mere exposure to credit card cues increase consumers’ monetary valuation of products (Feinberg, 1986; Shimp and Moody, 2000), attention to product benefits (Chatterjee and Rose, 2012), purchase intentions for unhealthy food products (Thomas et al , 2011), tip amounts for restaurant servers (McCall and Belmont, 1996) and willingness to wait for larger-later payoff (Duclos and Khamitov, 2019). Given the omnipresence of credit card cues surrounding consumers nowadays and the robust evidence of credit card cue effects on consumer behavior in the existing literature, this paper further explores those effects and their boundary conditions.…”

The effect of chronic regulatory focus and social comparison on undergraduates’ intertemporal choices under gain-loss frame

“…From another perspective of results in experiment 1, for preventive focus individuals, delay discount rate of intertemporal decisions in loss frame was smaller than that in gain frame. Previous researches have shown that preventive focus individuals were more sensitive to losses (Lin and Wang, 2007;Yao and Yue, 2009), and took a longer-term horizon in intertemporal decision making to avoid loss (Duclos and Khamitov, 2019), were able to predict consequences of decisions made in the loss context (Scholer et al, 2010). Preventive focus individuals, therefore, will make more long-term choices in the loss frame (later-smaller losses choices) than in the gain frame (later-larger rewards choices), due to the sensitivity of losses.…”

Price-Denomination Effect: Choosing to Pay With Denominations That Are the Same as the Product Prices

“…The results also have implications for when people choose between payment forms. Past research suggests that since parting with cash is psychologically more painful than parting with other money forms ( Prelec and Loewenstein, 1998 ; Duclos and Khamitov, 2019 ), people will spend more using cards as compared to cash ( Prelec and Simester, 2001 ; Soman, 2003 ; Raghubir and Srivastava, 2008 ). Our findings from study 6 suggest that, different from what previous work has documented, there is no difference in the pain of parting with money between the cash condition and the card condition.…”