Decisions by Rules: The Case of Unwillingness to Pay for Beneficial Delays

Abstract:     
Since the emergence of neoclassical economics, individual decision making has been viewed largely from an outcome-maximizing perspective. Building on previous work, the authors suggest that when people make payment decisions, they consider not only their preferences for different alternatives but also guiding principles and behavioral rules. The authors describe and test two characteristics pertaining to one specific rule that dictates consumers should not pay for delays, even if they are beneficial: rule invocation and rule override. The results show that money can function as the invoking cue for this rule, that the reliance on this rule can undermine utility maximization, and that this rule may be used as a first response to the decision problem but can be overridden. The article ends with a discussion of more general applications of such rules, which may explain some of the seemingly systematic inconsistencies in the ways consumers behave.

Keywords: Decision making, rules, intertemporal choice

JEL Classifications: M31, D91

Working Paper Series