IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Aggregating time preferences with decreasing impatience

Listed author(s):
  • Nina Anchugina
  • Matthew Ryan
  • Arkadii Slinko
Registered author(s):

    It is well-known that for a group of time-consistent decision makers their collective time preferences may become time-inconsistent. Jackson and Yariv (2014) demonstrated that the result of aggregation of exponential discount functions always exhibits present bias. We show that when preferences satisfy the axioms of Fishburn and Rubinstein (1982), present bias is equivalent to decreasing impatience (DI). Applying the notion of comparative DI introduced by Prelec (2004), we generalize the result of Jackson and Yariv (2014). We prove that the aggregation of distinct discount functions from comparable DI classes results in the collective discount function which is strictly more DI than the least DI of the functions being aggregated. We also prove an analogue of Weitzman's (1998) result, for hyperbolic rather than exponential discount functions. We show that if a decision maker is uncertain about her hyperbolic discount rate, then long-term costs and benefits will be discounted at a rate which is the probability-weighted harmonic mean of the possible hyperbolic discount rates.

    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.

    File URL: http://arxiv.org/pdf/1604.01819
    File Function: Latest version
    Download Restriction: no

    Paper provided by arXiv.org in its series Papers with number 1604.01819.

    as
    in new window

    Length:
    Date of creation: Apr 2016
    Handle: RePEc:arx:papers:1604.01819
    Contact details of provider: Web page: http://arxiv.org/

    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.:

    as
    in new window


    1. Takeuchi, Kan, 2011. "Non-parametric test of time consistency: Present bias and future bias," Games and Economic Behavior, Elsevier, vol. 71(2), pages 456-478, March.
    2. al-Nowaihi, Ali & Dhami, Sanjit, 2006. "A note on the Loewenstein-Prelec theory of intertemporal choice," Mathematical Social Sciences, Elsevier, vol. 52(1), pages 99-108, July.
    3. Matthew O. Jackson & Leeat Yariv, 2014. "Present Bias and Collective Dynamic Choice in the Lab," American Economic Review, American Economic Association, vol. 104(12), pages 4184-4204, December.
    4. 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.
    5. Jamison, Dean T. & Jamison, Julian, 2011. "Characterizing the Amount and Speed of Discounting Procedures," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 2(02), pages 1-56, April.
    6. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
    7. 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.
    8. Quiggin, John & Horowitz, John, 1995. "Time and Risk," Journal of Risk and Uncertainty, Springer, vol. 10(1), pages 37-55, January.
    9. Jamison Dean T. & Jamison Julian, 2011. "Characterizing the Amount and Speed of Discounting Procedures," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(2), pages 1-56, April.
    10. 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.
    11. Drazen Prelec, 2004. "Decreasing Impatience: A Criterion for Non-stationary Time Preference and "Hyperbolic" Discounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 511-532, October.
    12. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    13. 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.
    14. Matthew O. Jackson & Leeat Yariv, 2015. "Collective Dynamic Choice: The Necessity of Time Inconsistency," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 150-178, November.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:1604.01819. 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: (arXiv administrators)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.