The improving sequence effect on monetary sequences

Garcia, Adriana; Torrecillas, María José Muñoz; Rambaud, Salvador Cruz

doi:10.1016/j.heliyon.2020.e05643

Cited by 3 publications

(1 citation statement)

References 35 publications

(102 reference statements)

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“…For positive series of future rewards such as incomes, restaurant visits, leisure activities or other gains, the preference for improvement means that individuals prefer to start with the least attractive outcome and end with the most attractive outcome than the opposite, i.e., they prefer the rising sequence over the falling sequence adding up to the same total amount Prelec, 1991, 1993;Loewenstein and Sicherman, 1991;Gigliotti and Sopher, 1997;Thaler, 1999;Matsumoto et al, 2000;Guyse et al, 2002;Duffy and Smith, 2013;Duxbury et al, 2013). Likewise, for negative series of outcomes such as pains, annoying noise, discomfort or other losses, individuals prefer the falling sequence over the rising sequence (Ariely and Loewenstein, 2000;Ariely and Zauberman, 2000;Langer et al, 2005;Rambaud et al, 2018;Garcia et al, 2020). Some researchers examined human preferences for sequences with respect to loan repayment plans.…”

Section: Introductionmentioning

confidence: 99%

Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

Yang

Wang

et al. 2021

Front. Psychol.

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The improving sequence effect suggests that in choices between a rising earning and any other sequences, participants prefer the rising earning. Recent studies show that the improving sequence effect also exists in a loan context. As consumers have a strong preference for falling loan profiles, banks may consider to offer loans in which the loan repayments concentrate at the beginning of the loan term. In this paper, we examined the improving sequence effect in context of a car loan with three repayment plans expressed in temporally reframed prices (TRP). By regressing the evaluation of loan profiles on the perceived price attractiveness, price complexity, TRP and the interaction terms, we find that (1) the perceived price attractiveness and price complexity significantly predict the loan evaluation, and they also explain a significant proportion of variance in loan evaluation; (2) the TRP effect interacts with the improving sequence effect. Specifically, with the introduction of TRP, respondents prefer constant profiles over falling profiles. TRP may explain why level-payment loans are still popular in real world, though the improving sequence effect suggests otherwise.

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Section: Introductionmentioning

confidence: 99%

Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

Yang

Wang

et al. 2021

Front. Psychol.

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A systematic review of the main anomalies in intertemporal choice

Rambaud

Fernández

Oller

2023

Journal of Behavioral and Experimental Economics

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An analysis of the algebraic structures in the context of intertemporal choice

Rambaud¹,

Torrecillas

2022

MATH

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<abstract><p><italic>Framework and justification</italic>: The content of this paper is located on the intersection of two fields: Finance and Algebra. In effect, the current dynamism shown by most financial instruments makes it necessary to endow the foundations of finance with, as general as possible, algebraic structures. Therefore, the <italic>objective</italic> of this paper is to provide a novel view of the fundamentals of finance by using purely algebraic concepts and structures, more specifically the properties of separability and additivity of the involved discount functions and their corresponding operators. This approach provides more flexibility to the axioms of financial mathematics, so anticipating potential changes in the behavior of the so-called "rational" decision makers. <italic>Methodologically</italic>, this paper uses a variety of algebraic tools which fit the intuition behind the financial logic. Indeed, the main <italic>contribution</italic> of the paper is the wide variety of algebraic concepts belonging to the abstract algebra which can be applied to describe the behavior of intertemporal choices.</p></abstract>

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The improving sequence effect on monetary sequences

Cited by 3 publications

References 35 publications

Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

A systematic review of the main anomalies in intertemporal choice

An analysis of the algebraic structures in the context of intertemporal choice

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