Beyond Myopia: Scarcity and Intertemporal Choice Reversals

33 Pages Posted: 27 Nov 2019

See all articles by Eesha Sharma

Eesha Sharma

Dartmouth College; Dartmouth College - Tuck School of Business

Stephanie Tully

Stanford University

Xiang Wang

affiliation not provided to SSRN

Date Written: October 4, 2019

Abstract

It is widely understood that scarcity focuses people on “here and now” problems, causing myopic, impulsive decisions. Our work challenges this basic premise and asks whether scarcity can ever lead to increased patience. We suggest that existing work that has inadvertently conflated resource scarcity with threatened needs that are temporally proximal. By disaggregating the role of scarcity and the temporal proximity of needs, we demonstrate the novel finding that scarcity can increase preferences for larger, later outcomes. Three preregistered, incentive compatible experiments demonstrate that the relationship between scarcity and intertemporal choice is more complex than previously understood. In addition to demonstrating a reversal of typical intertemporal preferences under scarcity, our findings offer a new interpretation of existing findings and suggest that responses to scarcity may be more in line with standard economic theory than currently believed.

Keywords: scarcity, myopia, intertemporal choice, financial decision making, economic psychology, discount rates, money

JEL Classification: D1, M, G4, G5

Suggested Citation

Sharma, Eesha and Tully, Stephanie and Wang, Xiang, Beyond Myopia: Scarcity and Intertemporal Choice Reversals (October 4, 2019). Available at SSRN: https://ssrn.com/abstract=3487013 or http://dx.doi.org/10.2139/ssrn.3487013

Eesha Sharma (Contact Author)

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Stephanie Tully

Stanford University ( email )

Stanford, CA 94305
United States

Xiang Wang

affiliation not provided to SSRN

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