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Is It 'Economics and Psychology?' : The Case of Hyperbolic Discounting

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  • Ariel Rubinstein

Abstract

The paper questions the methodology of "economics and psychology". It focuses on the case of hyperbolic discounting. Using some experimental results, I argue that the same sort of evidence which rejects the standard constant discount utility functions can just as easily reject hyperbolic discounting as well. Futhermore, a decision-making procedure based on similarity relation better explains the observations and is more intuitive. The paper concludes that combining "economics and psychology" requires opening the black box of decision-makers rather than modifying funcional forms.

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Bibliographic Info

Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 7640.

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Date of creation: 31 Dec 2000
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Handle: RePEc:cla:levarc:7640

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Web page: http://www.dklevine.com/

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Cited by:
  1. Manzini, Paola & Mariotti, Marco, 2006. "Two-Stage Boundedly Rational Choice Procedures: Theory and Experimental Evidence," IZA Discussion Papers 2341, Institute for the Study of Labor (IZA).
  2. Manzini Paola & Mariotti Marco, 2006. "A Vague Theory of Choice over Time," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 6(1), pages 1-27, October.
  3. Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Wallis Working Papers, University of Rochester - Wallis Institute of Political Economy WP34, University of Rochester - Wallis Institute of Political Economy.
  4. Schilizzi, Steven, 2003. "Deciding with long-term environmental impacts: what role for discounting?," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia, Australian Agricultural and Resource Economics Society 58206, Australian Agricultural and Resource Economics Society.
  5. Carrillo, Juan D & Dewatripont, Mathias, 2001. "Promises, Promises…," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2680, C.E.P.R. Discussion Papers.
  6. Paola Manzini & Marco Mariotti & Luigi Mittone, 2006. "Choosing Monetary Sequences: Theory and Experimental Evidence," CEEL Working Papers, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia 0601, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  7. Paola Manzini, 2001. "Time preferences: do they matter in bargaining?," Experimental, EconWPA 0106001, EconWPA.
  8. Samuelson,L. & Swinkels,J.M., 2001. "Information and the evolution of the utility function," Working papers, Wisconsin Madison - Social Systems 6, Wisconsin Madison - Social Systems.
  9. Efe A Ok & Yusufcan Masatlioglu, 2003. "A General Theory of Time Preferences," Levine's Bibliography 234936000000000089, UCLA Department of Economics.

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