When do you want it? Time, decisions, and public policy

Most consumer decisions involve trade-offs of costs and benefits over time. The research literature on "intertemporal choice" examines behavioral regularities in how people think about such decisions, drawing from marketing, psychology, and behavioral economics. This diverse literature is relevant to the analysis of public policy issues related to consumers' discounting of future outcomes "too much" compared with sooner outcomes. A stream of outcomes can be viewed as occurring in three temporal regions: the present, the near future, and the more distant future. Somewhat different research streams have developed around the topic of underweighting outcomes in the distant (compared with the near) future and of overweighting outcomes in the present compared with any point in the future. The authors review key concepts from the literature on underweighting the distant future versus the near-term future to analyze policy issues related to consumers' saving for retirement and their response to rebates. The authors review key concepts from the literature on impulsive behavior and present-biased preferences to analyze the problems of self-control that people have in their consumption of "sin" products that are proximate and that affect rewards in the present. The authors critique current information and incentive remedies that ignore behavioral principles from the literature, focusing their recommendations on policy interventions designed to influence eating habits and obesity and on cooling-off laws that govern return policies for consumers' big-ticket purchases.