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Decreasing impatience and the magnitude effect jointly contradict exponential discounting

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  • Noor, Jawwad

Abstract

The experimental literature on time preference finds that the manner in which subjects discount money (as opposed to utility) exhibits properties known as Decreasing Impatience and the Magnitude Effect. While these findings are often referred to as anomalies for the Exponential Discounting model, several authors have demonstrated that each of these qualitative findings can be explained by the curvature of utility and thus are not anomalies. We prove that, under basic regularity conditions, the two findings jointly imply the existence of Preference Reversals, and thus jointly contradict the Exponential Discounting model.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 2 (March)
Pages: 869-875

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:2:p:869-875

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Time preference Preference reversals Decreasing impatience Magnitude effect DU anomalies;

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