Non-hyperbolic time inconsistency
The commonly used hyperbolic and quasi-hyperbolic discount functions have been developed to accommodate decreasing impatience, which is the prevailing empirical finding in intertemporal choice, in particular for aggregate behavior. However, these discount functions do not have the flexibility to accommodate increasing impatience or strongly decreasing impatience. This lack of flexibility is particularly disconcerting for fitting data at the individual level, where various patterns of increasing impatience and strongly decreasing impatience will occur for a significant fraction of subjects. This paper presents discount functions with constant absolute (CADI) or constant relative (CRDI) decreasing impatience that can accommodate any degree of decreasing or increasing impatience. In particular, they are sufficiently flexible for analyses at the individual level. The CADI and CRDI discount functions are the analogs of the well-known CARA and CRRA utility functions for decision under risk.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Drazen Prelec & George Loewenstein, 1991. "Decision Making Over Time and Under Uncertainty: A Common Approach," Management Science, INFORMS, vol. 37(7), pages 770-786, July.
- Jane E. J. Ebert & Drazen Prelec, 2007. "The Fragility of Time: Time-Insensitivity and Valuation of the Near and Far Future," Management Science, INFORMS, vol. 53(9), pages 1423-1438, September.
- Charles M. Harvey, 1986. "Value Functions for Infinite-Period Planning," Management Science, INFORMS, vol. 32(9), pages 1123-1139, September.
- George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 573-597.
- Selçuk Onay & Ayse Öncüler, 2007. "Intertemporal choice under timing risk: An experimental approach," Journal of Risk and Uncertainty, Springer, vol. 34(2), pages 99-121, April.
- Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001.
"Estimating Individual Discount Rates in Denmark: A Field Experiment,"
NCEE Working Paper Series
200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
- Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
- Elisabet Rutstrom & Glenn Harrison & Melonie Williams & Morten Lau, 2002. "Estimating individual discount rates in denmark: A field experiment," Artefactual Field Experiments 00062, The Field Experiments Website.
- David Laibson, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 443-478.
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
- Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
- Arthur E. Attema & Han Bleichrodt & Kirsten I. M. Rohde & Peter P. Wakker, 2010. "Time-Tradeoff Sequences for Analyzing Discounting and Time Inconsistency," Management Science, INFORMS, vol. 56(11), pages 2015-2030, November.
- E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
- Gary Gigliotti & Barry Sopher, 1998. "Analysis of Intertemporal Choice: A New Framework and Experimental Results," Departmental Working Papers 199804, Rutgers University, Department of Economics.
- Mohammed Abdellaoui & ArthurE. Attema & Han Bleichrodt, 2010.
"Intertemporal Tradeoffs for Gains and Losses: An Experimental Measurement of Discounted Utility,"
Royal Economic Society, vol. 120(545), pages 845-866, 06.
- Mohammed Abdellaoui & Arthur E. Attema & Han Bleichrodt, 2010. "Intertemporal Tradeoffs for Gains and Losses: An Experimental Measurement of Discounted Utility," Post-Print hal-00537058, HAL.
- Fishburn, Peter C & Rubinstein, Ariel, 1982. "Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 677-94, October.
- Paul A. Samuelson, 1937. "A Note on Measurement of Utility," Review of Economic Studies, Oxford University Press, vol. 4(2), pages 155-161.
- Harrell Chesson & W. Viscusi, 2003. "Commonalities in Time and Ambiguity Aversion for Long-Term Risks ," Theory and Decision, Springer, vol. 54(1), pages 57-71, February.
When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:66:y:2009:i:1:p:27-38. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.