Intransitive intertemporal choice

Multiattribute choice rules can be classified as being either alternative-based or attribute-based. Conventional accounts of intertemporal choice, hyperbolic and exponential discounting, assume alternative-based rules. One consequence of using these rules is that choices will be transitive, meaning that if a is preferred to b, and b is preferred to c, then a will be preferred to c. There have been many demonstrations of intransitivity in domains other than intertemporal choice, and in this paper we undertake to establish whether intransitive intertemporal choice can be explained by a stochastic specification of exponential discounting, or if we need to invoke an attribute-based choice process. In an experiment, we demonstrate that the pattern of intransitive responses is inconsistent with alternative-based choice. We argue that intransitive choices can best be explained by a version of Tversky's (1969) lexicographic-semiorder rule, in which choice is based on the amount of money when that amount exceeds a threshold, but on delay otherwise. Transitive choices, on the other hand, seem to be based on the rule that ‘earlier is better’ or else on a consistent rate of discount. Copyright © 2000 John Wiley & Sons, Ltd.