How Awareness and Valuation of the Future Jointly Shape Intertemporal Financial Decisions

Daniel BartelsUniversity of Chicago
Oleg UrminskyUniversity of Chicago
Shane FrederickYale University

Abstract

We examine people’s preferences about whether to engage in discretionary spending vs. save their money and find that re-duced spending in the present requires the combination of both being motivated to provide for one’s future self (valuing the fu-ture) and actively considering long-term implications of one’s choices (awareness of the future). Feeling more connected to the future self—thinking that the important psychological prop-erties that define your current self are preserved in the person you will be in the future—provides the motivation for people to make far-sighted choices by changing the valuation of future outcomes. However, this change only reduces spending when opportunity costs are highlighted.

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