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Does experience with high inflation affect intertemporal decision making? Sensitivity to inflation rates in Argentine and British delay discounting choices

Macchia, L., Plagnol, A. ORCID: 0000-0001-5705-8949 and Reimers, S. ORCID: 0000-0002-9497-0942 (2018). Does experience with high inflation affect intertemporal decision making? Sensitivity to inflation rates in Argentine and British delay discounting choices. Journal of Behavioral and Experimental Economics, 75, pp. 76-83. doi: 10.1016/j.socec.2018.05.006

Abstract

Delay discounting captures the way in which people devalue rewards which are not immediately available as a function of their delay until receipt. Normatively, decision makers should be sensitive to inflation rates when evaluating delayed rewards because the value of a delayed outcome is eroded by inflation. We hypothesised that participants from countries with direct experience of high inflation would be particularly sensitive to inflation rates when making intertemporal choices; i.e. they may be more likely to take into consideration the effect of inflation on future rewards. This study compares intertemporal choices of participants from countries with dramatically different histories of inflation: Argentina and Britain. Participants completed a delay discounting task under two inflation rate conditions (2% and 20%, between subjects). We found that people discounted future rewards more steeply under the 20% inflation rate condition than under the 2% condition. Participants from Argentina, the country with much higher current and historical inflation rates, discounted future rewards more steeply in both inflation rate conditions than participants from the UK. However, Argentines were not more sensitive to inflation rates than British people.

Publication Type: Article
Additional Information: © 2018, Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Delay discounting; Intertemporal choice; Argentina; UK; Inflation rate
Departments: School of Arts & Social Sciences > Psychology
URI: http://openaccess.city.ac.uk/id/eprint/19828
[img] Text - Accepted Version
This document is not freely accessible until 29 May 2019 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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