How time flies: Time perception and intertemporal choice☆

This paper identifies a potential gap between time preference and intertemporal choices such as time discounting tasks: The intertemporal choices could be partly driven by a biased perception of time and thus may not completely reveal actual time preference. To test this, we explore the causal relationship between time perception and intertemporal choices by conducting a laboratory experiment in which cognitive load is used as a stimulating instrument to induce differences in time perception. We establish that the perceived time lengths for subjects with high cognitive load are shorter than those with low cognitive load and that individuals who underestimate time appear more patient in their intertemporal choices. Mediation analyses show that time perception mediates a significant portion of cognitive load's effect on intertemporal choices. Our study thus demonstrates that time preference identified by intertemporal choices might be confounded by potentially biased time perception, calling for improving suboptimal time -related economic decisions due to an individual's misperception of how time flies.