Are Intertemporal Preferences Transitive? A Bayesian Analysis of Repeated Individual Intertemporal Choices


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Abstract

Transitivity of preferences is a central axiom of rational decision making. Previous research on intertemporal choice has suggested that intertemporal preferences might be intransitive, for which nonadditivity in delay discounting is 1 of the reasons. Most studies in this line of research have either analyzed aggregate data or ignored the probabilistic nature of intertemporal choice when addressing individual data. In this article, I present a refined experiment for studying transitivity of intertemporal preferences with repeatedly presented choice questions tailored to each individual participant. A Bayesian model comparison was applied to the individual choice data to test 4 stochastic models of transitivity—weak, moderate, and strong stochastic transitivity, as well as a mixture model of transitive preference—against the most general model allowing for all types of preference orders, and intermediate models accommodating nonadditivity in delay discounting. The results show that individual data from a majority of participants were consistent with a transitive view of intertemporal preferences. In addition, nonadditivity in delay discounting—defined as special cases of violating weak, moderate, or strong stochastic transitivity—rarely occurred at an individual level. These findings provide critical information for developing and testing competing cognitive models of intertemporal choice.

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