Hyperbolic discounting and the standard model: Eliciting discount functions |
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Authors: | Jawwad Noor |
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Affiliation: | aDept. of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, United States |
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Abstract: | Experiments on static intertemporal choice find evidence of particularly extreme impatience toward immediate rewards. While this is often taken as support for hyperbolic discounting, it could also arise because the most likely participants in experiments may be those with the most immediate need for money. We conduct a calibration exercise and find that the extreme impatience observed in experiments can be accommodated by a standard exponential discounting model with no discounting and expectation of a ‘small’ increase in the base consumption level. The calibration uses existing estimates of curvature of utility. |
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Keywords: | Experiments Hyperbolic discounting Exponential discounting Preference reversals Decreasing impatience DU anomalies |
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