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"Economics and Psychology"? The Case of Hyperbolic Discounting

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  • Ariel Rubinstein

Abstract

The article questions the methodology of "economics and psychology" in its focus on the case of hyperbolic discounting. Using some experimental results, I argue that the same type of evidence, which rejects the standard constant discount utility functions, can just as easily reject hyperbolic discounting as well. Furthermore, a decision-making procedure based on similarity relations better explains the observations and is more intuitive. The article concludes that combining "economics and psychology" requires opening the black box of decision makers instead of modifying functional forms. Copyright 2003 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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  • Ariel Rubinstein, 2003. ""Economics and Psychology"? The Case of Hyperbolic Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1207-1216, November.
  • Handle: RePEc:ier:iecrev:v:44:y:2003:i:4:p:1207-1216
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