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Psychophysics of time perception and valuation in temporal discounting of gain and loss

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  • Han, Ruokang
  • Takahashi, Taiki
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    Abstract

    Anomalies in intertemporal choice (e.g. “hyperbolic” discounting and sign effect) have been investigated in econophysics and behavioral neuroeconomics. We experimentally examined the roles of psychophysical effects of time perception and subjective valuation of outcomes (value function) on temporal discounting of gain and loss, by utilizing a q-exponential temporal discounting model developed in Tsallis’s thermostatistics. Consequently, we demonstrated that both “hyperbolic” discounting and the sign effect (i.e. gain is more steeply time-discounted than loss) are due to psychophysical effects of time perception (i.e., nonlinearity and gain–loss asymmetry). Implications of the present study for neuroeconomics and econophysics are discussed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 391 (2012)
    Issue (Month): 24 ()
    Pages: 6568-6576

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    Handle: RePEc:eee:phsmap:v:391:y:2012:i:24:p:6568-6576

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Time discounting; Psychological time; Sign effect; Psychophysics; Behavioral economics;

    References

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    Cited by:
    1. Cruz Rambaud, Salvador & Muñoz Torrecillas, María José, 2013. "A generalization of the q-exponential discounting function," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(14), pages 3045-3050.
    2. repec:wut:journl:v:3:y:2012:id:1044 is not listed on IDEAS
    3. Krzysztof Piasecki, 2012. "The basis of financial arithmetic from the viewpoint of utility theory," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 3, pages 37-53.

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