Time discounting: Declining impatience and interval effect

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. However, in many economic experiments on declining impatience so far, two elements, delay and interval, are mixed. To measure time discount rate in experiments, three timings should be distinguished-now, earlier option, and later option. Because "now" is fixed, two quantities define the situation fully; delay represents time difference between now and an earlier option, and interval represents time difference between earlier and later options. Terms of use: Documents in EconStor mayAlthough time discount rates may depend on these two factors, most experiments did not distinguish them. Nevertheless, the researchers interpreted their results indicating that time discount rates solely depend on the delay, and reported that per-period time discount rate decreases as the delay increases. However, people's discounting may depend heavily on the interval, not on the delay, so that decision-making may be time consistent.Read (2001) has already pointed out this problem. He divided the total interval (18 months) into three subintervals (six months each) and compared discount rates to find "subadditive time discounting" that a product of three discount rates (plus unity) for subintervals is higher than the discount rate (plus unity) for the total interval. Read (2001) denied the declining impatience because of lack of evidence when intervals are controlled.1 This paper does not consider the case of endogenous time discount rate (Uzawa, 1968). If time discount rate of an individual changes over time, which he or she does not know ex ante, his or her decision making may be time inconsistent. However, these cases are not objects of this paper. 2According to Read (2001), who investigated declining impatience by distinguishing the delay from interval, decision making of human beings is time consistent. Declining impatience or hyperbolic discounting, which is a standard model in psychology and physiological neuroscience as well as in behavioral economics, has not indeed had a firm empirical foundation.The purpose of this paper is to elucidate whether declining impatience is really a behavioral character of human beings. To achieve this, we requested subjects to choose one of the two options: an earlier option where one can get a smaller reward sooner; and a later option where one can get a larger reward, but later. Specifying these options, we control the following three factors: (1) the amount of reward, (2) the interval, and (3) the delay. Declining impatience is a featu...

Golden Eggs and Hyperbolic Discounting

“…By contrast, the golden eggs model predicts that even fully rational consumers will exhibit asset-specific MPCs. 13 In the golden eggs model the current self is always endogenously liquidity constrained on the equilibrium path. So the MPC out of current cash flow is one.…”

“…Proposition 2 formalizes this claim. 13. Laibson [1994b] proposes another hyperbolic discounting model that generates some mental accounting behavior.…”

Socio-Emotional Status, Education, and Time-Discounting in Japanese Non-Smoking Population: A Multi-Generational Study

“…It is therefore important to examine the role of age-dependency of time-perception in intertemporal choice, in future behavioral economic studies. Moreover, it is known that there are some "anomalies" in intertemporal choice (e.g., hyperbolic discounting, sign effect, subadditive discounting, delay-speedup asymmetry, and interval effect) (Frederick, Shane, Loewenstein, & O'Donoghue, 2002;Kinari, Ohtake, & Tsutsui, 2009;Scholten & Read, 2010;Takahashi, 2009). Future studies in behavioral economics should examine whether these anomalies in intertemporal choice are related to socio-emotional status, age, and education.…”

The Cambridge Handbook of Psychology and Economic Behaviour

“…Subadditive discounting occurs when people are more impatient when the delay to an outcome is divided into subintervals than when it is undivided (e.g., Kinari, Ohtake and Tsutsui, 2009;McAlvanah, 2010;Read, 2001;Read and Roelofsma, 2003;Scholten and Read, 2006;. Reconsider the example for the delay effect discussed in the preceding section.…”

“…Tests of the common difference effect serve as evidence for hyperbolic discounting, free from the confusion of subadditive discounting. However, existing evidence has shown a mixture of constant impatience (e.g., Halevy, 2015;Read, 2001), decreasing impatience or hyperbolic discounting (e.g., Bleichrodt, Gao and Rohde, 2016;Green, Myerson and Macaux, 2005;Kinari et al, 2009;Read and Read, 2004;Read and Roelofsma, 2003;Scholten and Read, 2006;Sopher and Sheth, 2006) and increasing impatience or antihyperbolic discounting (e.g., Attema et al, 2010Attema et al, , 2016Holcomb and Nelson, 1992;Read, Olivola and Hardisty, in press;Sayman and Öncüler, 2009).…”