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An experimental investigation of time discounting in strategic settings

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  • Deck, Cary
  • Jahedi, Salar

Abstract

Several studies have shown that people greatly discount future benefits and costs, but few have examined how discounting is manifested in strategic settings. This paper investigates the degree to which the timing of payments affects behavior in four commonly studied strategic settings: a Prisoners’ Dilemma, a Stag-Hunt Game, a First Price Auction, and a Second Price Auction. In general, a two week delay in the date of payment has a comparable effect on outcomes as a substantial reduction in current payoffs. A follow-up study compares individual’s own discount rates with their beliefs of others’ discount rates and finds that people generally think they are more patient than others. This belief can drive behavior in strategic settings: we find clear evidence for this in the Stag-Hunt Game.

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  • Deck, Cary & Jahedi, Salar, 2015. "An experimental investigation of time discounting in strategic settings," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 54(C), pages 95-104.
    • Handle: RePEc:eee:soceco:v:54:y:2015:i:c:p:95-104
    DOI: 10.1016/j.socec.2014.12.004
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    Cited by:

    1. Jindrich Matousek & Tomas Havranek & Zuzana Irsova, 2022. "Individual discount rates: a meta-analysis of experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 318-358, February.
    2. de Oliveira, Angela C.M. & Jacobson, Sarah, 2021. "(Im)patience by proxy: Making intertemporal decisions for others," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 83-99.
    3. Zhaoyang Liu & Jintao Xu & Xiaojun Yang & Qin Tu & Nick Hanley & Andreas Kontoleon, 2019. "Performance of Agglomeration Bonuses in Conservation Auctions: Lessons from a Framed Field Experiment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(3), pages 843-869, July.
    4. Deck, Cary & Jahedi, Salar, 2015. "The effect of cognitive load on economic decision making: A survey and new experiments," European Economic Review, Elsevier, vol. 78(C), pages 97-119.
    5. Daniel Houser & Jian Song, 2021. "Costly Waiting in Dynamic Contests: Theory and Experiment," Working Papers 1082, George Mason University, Interdisciplinary Center for Economic Science.

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