Positive Affect Provides Functional Benefits In Intertemporal Decision Making By Enhancing Cognitive Flexibility

Abstract

Intertemporal decision making has important implications for consumer welfare and well-being, since poor decisions can lead to problems of self-control, excessive consumer debt, or other forms of financial distress. Prior research suggests that directly changing an individual's cognitive mindset can influence their intertemporal decision making. Drawing on prior research suggesting that positive affect increases cognitive flexibility, in this research I suggest that mild positive affect can change an individual's way of thinking to that of an open and flexible mindset. More specifically, I propose that positive affect facilitates elaborate thoughtful processing of intertemporal options and appraisal of the decision situation in a more integrative and flexible manner, and thus it provides functional benefits in consumers' intertemporal decision making. In that theme, I examine three specific issues in individual papers. First, Chapter 2 examines the influence of positive affect on consumers' intertemporal preferences and the underlying processes. I demonstrate that, under positive affect, consumers are more willing to wait for sufficiently large delayed rewards and less likely to discount the value of rewards over waiting time. Chapter 3 considers the interaction of positive affect and cognitive mindset in forming intertemporal preferences, both of which have been shown to influence intertemporal preferences independently. The results in Chapter 3 suggest that positive affect can enable people to hold back from the maladaptive influence of low-level mindset in intertemporal choice situations. Finally, Chapter 4 investigates the influence of positive affect on consumers' budget estimation for the near and the distant future. I show that positive affect can reduce budgeting bias by helping people think of budget estimates in a more decomposed, concrete way with an integrative perspective. The findings further suggest that the cognitive flexibility facilitated by positive affect promotes thinking in a broader perspective, but it does not lead to cursory or careless decision making. Together, this research offers important implications not only for consumers, but also for managers and public policy practitioners who want to create positive behavioral change among consumers.