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Hyperbolic discounting and the standard model: Eliciting discount functions

  • Noor, Jawwad

Experiments on static intertemporal choice find evidence of particularly extreme impatience toward immediate rewards. While this is often taken as support for hyperbolic discounting, it could also arise because the most likely participants in experiments may be those with the most immediate need for money. We conduct a calibration exercise and find that the extreme impatience observed in experiments can be accommodated by a standard exponential discounting model with no discounting and expectation of a 'small' increase in the base consumption level. The calibration uses existing estimates of curvature of utility.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 5 (September)
Pages: 2077-2083

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:5:p:2077-2083
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