University of Nottingham

Intertemporal Decision Making � What To Watch And When? A Field Investigation Using Online Television

Research Agenda

Modern economics is built upon theories of how individuals make decisions and take into account elements of their environment such as risk or time. Experimental economics has risen in prominence recently, providing substantial amounts of evidence that individuals do not behave as traditional economic theories predict.

This proposal focuses on one such theory: the Discounted Utility Model. This is a theory of how individuals deal with intertemporal choices (i.e. decisions that involve trade-offs among costs and benefits occurring at different times). Essentially, the theory works by condensing all disparate motives underlying intertemporal choice into a single, constant discount factor. The theory is simple and mathematically tractable and has been the standard theory since the 1930s.. There is, however, growing evidence that it is not descriptively accurate. In particular, the evidence suggests that the discount rate is not a constant, but instead declines over time, differs for gains and losses and varies across commodities.

Evidence of apparently robust and predictable violations of the Discounted Utility Model have led some to call for alternative theories to more accurately describe actual behaviour. But there is debate over just how prevalent or significant such anomalies are outside a laboratory environment. Doubts about this are fuelled partly by the relatively small sample sizes of experiments and by questions about the representativeness of the subjects and the tasks that they face. The primary objective of this study would be to investigate whether similar phenomena occur in a field environment where individuals are just going about their normal economic activity. That would facilitate an important and timely test of whether the failures of theory previously observed in the confines of the lab generalise beyond it. The use of a larger subject pool would also allow more powerful statistical tests.


Research as a Pilot Study

The current proposal is to run a relatively small-scale pilot study. focussing on individuals� decisions to either stream or download content from online television software. Program content will be classified on a continuous vice-virtue scale by means of an online survey.

The motivation flows from a paper published by Read, Loewenstein and Kalyanaraman (Journal of Behavioural Decision Making 12: 257-273, 1999). It reports an experiment in which subjects choose 3 DVD rentals, a mixture of relative �vices� and �virtues�. They find a tendency for subjects to choose a vice (or low-brow film) to watch immediately but a virtue (or high-brow film) to watch at a later date.