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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 www.najecon.org in its series NajEcon Working Paper Reviews with number 625018000000000219.

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Date of creation: 04 Aug 2010
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Handle: RePEc:cla:najeco:625018000000000219

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Cited by:
  1. Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Game Theory and Information 0203003, EconWPA.
  2. Manzini, Paola & Mariotti, Marco, 2004. "A Vague Theory of Choice over Time," IZA Discussion Papers 1228, Institute for the Study of Labor (IZA).
  3. Paola Manzini & Marco Mariotti & Luigi Mittone, 2006. "Choosing Monetary Sequences: Theory and Experimental Evidence," CEEL Working Papers 0601, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  4. Paola Manzini, 2001. "Time Preferences: Do They Matter in Bargaining?," Working Papers 445, Queen Mary, University of London, School of Economics and Finance.
  5. 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).
  6. Schilizzi, Steven, 2003. "Deciding with long-term environmental impacts: what role for discounting?," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58206, Australian Agricultural and Resource Economics Society.
  7. Efe A Ok & Yusufcan Masatlioglu, 2003. "A General Theory of Time Preferences," Levine's Bibliography 234936000000000089, UCLA Department of Economics.
  8. Samuelson,L. & Swinkels,J.M., 2001. "Information and the evolution of the utility function," Working papers 6, Wisconsin Madison - Social Systems.
  9. Carrillo, Juan D & Dewatripont, Mathias, 2001. "Promises, Promises…," CEPR Discussion Papers 2680, C.E.P.R. Discussion Papers.

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