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Reconsidering the Experimental Evidence for Quasi-Hyperbolic Discounting

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  • Besharov, Gregory
  • Coffey, Bentley

Abstract

Experimental choices between delayed rewards are claimed to provide support for a model of preferences referred to variously as "quasi-hyperbolic," "hyperbolic," and "‚-‰." This paper shows that the experimental results do not differentiate quasi-hyperbolic discounting from exponential discounting. When experimental rewards are financial, quasi-hyperbolic agents can, like exponential agents, become better off by choosing to maximize wealth. Because of liquidity constraints, they may choose a reward with lower net present value, but so may exponential agents for the same reason. When rewards are not financial, then the choices of even exponential agents generally cannot be restricted because of complementarities and informational issues. Since generalizing preferences from exponential to quasi-hyperbolic is neither necessary nor sufficient to generate the experimental results, there is a fundamental identification problem.

Suggested Citation

  • Besharov, Gregory & Coffey, Bentley, 2003. "Reconsidering the Experimental Evidence for Quasi-Hyperbolic Discounting," Working Papers 03-03, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:03-03
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    Cited by:

    1. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    2. Reuben, Ernesto & Sapienza, Paola & Zingales, Luigi, 2010. "Time discounting for primary and monetary rewards," Economics Letters, Elsevier, vol. 106(2), pages 125-127, February.
    3. Schwarz, Mordechai E. & Sheshinski, Eytan, 2007. "Quasi-hyperbolic discounting and social security systems," European Economic Review, Elsevier, vol. 51(5), pages 1247-1262, July.

    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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