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Axiomatization and Measurement of Quasi-Hyperbolic Discounting

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  • José Luis Montiel Olea
  • Tomasz Strzalecki

Abstract

This article provides an axiomatic characterization of quasi-hyperbolic discounting and a more general class of semi-hyperbolic preferences. We impose consistency restrictions directly on the intertemporal trade-offs by relying on what we call “annuity compensations.” Our axiomatization leads naturally to an experimental design that disentangles discounting from the elasticity of intertemporal substitution. In a pilot experiment we use the partial identification approach to estimate bounds for the distributions of discount factors in the subject pool. Consistent with previous studies, we find evidence for both present and future bias. JEL Codes: C10, C99, D03, D90.

Suggested Citation

  • José Luis Montiel Olea & Tomasz Strzalecki, 2014. "Axiomatization and Measurement of Quasi-Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1449-1499.
  • Handle: RePEc:oup:qjecon:v:129:y:2014:i:3:p:1449-1499
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    File URL: http://hdl.handle.net/10.1093/qje/qju017
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    Cited by:

    1. Webb, Craig S., 2016. "Continuous quasi-hyperbolic discounting," Journal of Mathematical Economics, Elsevier, vol. 64(C), pages 99-106.
    2. Nina Anchugina, 2015. "A simple framework for the axiomatization of exponential and quasi-hyperbolic discounting," Papers 1511.06454, arXiv.org.
    3. Victor H. Aguiar & Nail Kashaev, 2018. "Stochastic Revealed Preferences with Measurement Error," Papers 1810.05287, arXiv.org.
    4. Mackenzie, Andrew, 2018. "A foundation for probabilistic beliefs with or without atoms," Research Memorandum 013, Maastricht University, Graduate School of Business and Economics (GSBE).
    5. Jaśkiewicz, Anna & Nowak, Andrzej S., 2014. "Stationary Markov perfect equilibria in risk sensitive stochastic overlapping generations models," Journal of Economic Theory, Elsevier, vol. 151(C), pages 411-447.
    6. repec:kap:theord:v:83:y:2017:i:3:d:10.1007_s11238-017-9603-2 is not listed on IDEAS
    7. repec:eee:gamebe:v:112:y:2018:i:c:p:67-77 is not listed on IDEAS
    8. Ubfal, Diego, 2016. "How general are time preferences? Eliciting good-specific discount rates," Journal of Development Economics, Elsevier, vol. 118(C), pages 150-170.
    9. Keith Marzilli Ericson & Jawwad Noor, 2015. "Delay Functions as the Foundation of Time Preference: Testing for Separable Discounted Utility," NBER Working Papers 21095, National Bureau of Economic Research, Inc.
    10. repec:eee:jeborg:v:145:y:2018:i:c:p:352-369 is not listed on IDEAS
    11. Nina Anchugina, 2017. "A simple framework for the axiomatization of exponential and quasi-hyperbolic discounting," Theory and Decision, Springer, vol. 82(2), pages 185-210, February.
    12. Jean-Pierre Drugeon & Thai Ha-Huy, 2018. "A not so myopic axiomatization of discounting," Documents de recherche 18-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    13. Pan, Jinrui & Webb, Craig S. & Zank, Horst, 2015. "An extension of quasi-hyperbolic discounting to continuous time," Games and Economic Behavior, Elsevier, vol. 89(C), pages 43-55.
    14. Lu, Shih En, 2016. "Models of limited self-control: Comparison and implications for bargaining," Economics Letters, Elsevier, vol. 145(C), pages 186-191.
    15. Daniele Pennesi, 2017. "Uncertain discount and hyperbolic preferences," Theory and Decision, Springer, vol. 83(3), pages 315-336, October.
    16. repec:eee:jetheo:v:177:y:2018:i:c:p:780-815 is not listed on IDEAS
    17. Dziewulski, Paweł, 2018. "Revealed time preference," Games and Economic Behavior, Elsevier, vol. 112(C), pages 67-77.
    18. repec:eee:jetheo:v:172:y:2017:i:c:p:348-375 is not listed on IDEAS
    19. D. Pennesi, 2016. "Intertemporal discrete choice," Working Papers wp1061, Dipartimento Scienze Economiche, Universita' di Bologna.
    20. Obara, Ichiro & Park, Jaeok, 2017. "Repeated games with general discounting," Journal of Economic Theory, Elsevier, vol. 172(C), pages 348-375.
    21. Sebastian Schweighofer-Kodritsch, 2015. "Time Preferences and Bargaining," STICERD - Theoretical Economics Paper Series /2015/568, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    22. Jean-Pierre Drugeon & Thai Ha-Huy, 2018. "Towards a Decomposition for the Future: Closeness, Remoteness & Temporal Biases," PSE Working Papers halshs-01962035, HAL.
    23. Lu, Shih En, 2016. "Self-control and bargaining," Journal of Economic Theory, Elsevier, vol. 165(C), pages 390-413.
    24. Yanchun Jin & Ryo Okui, 2018. "Testing for Overconfidence Statistically: A Moment Inequality Approach," KIER Working Papers 984, Kyoto University, Institute of Economic Research.
    25. Dusoruth, Vaneesha, 2018. "Household Food Waste Generation and Organics Recycling: Too Time Consuming or for the Better [Public] Good?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274132, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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