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Time-Tradeoff Sequences for Analyzing Discounting and Time Inconsistency

  • Arthur E. Attema


    (Department of Health Policy and Management, Erasmus University, 3000 DR Rotterdam, The Netherlands)

  • Han Bleichrodt


    (Erasmus School of Economics, Erasmus University, 3000 DR Rotterdam, The Netherlands)

  • Kirsten I. M. Rohde


    (Erasmus School of Economics, Erasmus University, 3000 DR Rotterdam, The Netherlands)

  • Peter P. Wakker


    (Erasmus School of Economics, Erasmus University, 3000 DR Rotterdam, The Netherlands)

This paper introduces time-tradeoff (TTO) sequences as a general tool to analyze intertemporal choice. We give several applications. For empirical purposes, we can measure discount functions without requiring any measurement of or assumption about utility. We can quantitatively measure time inconsistencies and simplify their qualitative tests. TTO sequences can be administered and analyzed very easily, using only pencil and paper. For theoretical purposes, we use TTO sequences to axiomatize (quasi-)hyperbolic discount functions. We demonstrate the feasibility of measuring TTO sequences in an experiment, in which we tested the axiomatizations. Our findings suggest rejections of several currently popular discount functions and call for the development of new ones. It is especially desirable that such discount functions can accommodate increasing impatience.

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Article provided by INFORMS in its journal Management Science.

Volume (Year): 56 (2010)
Issue (Month): 11 (November)
Pages: 2015-2030

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Handle: RePEc:inm:ormnsc:v:56:y:2010:i:11:p:2015-2030
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