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Axiomatization and Measurement of Quasi-Hyperbolic Discounting

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  • Montiel Olea, J. L.
  • Strzalecki, Tomasz

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.

Suggested Citation

  • Montiel Olea, J. L. & Strzalecki, Tomasz, 2014. "Axiomatization and Measurement of Quasi-Hyperbolic Discounting," Scholarly Articles 12967840, Harvard University Department of Economics.
  • Handle: RePEc:hrv:faseco:12967840
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    Cited by:

    1. Ubfal, Diego, 2016. "How general are time preferences? Eliciting good-specific discount rates," Journal of Development Economics, Elsevier, vol. 118(C), pages 150-170.
    2. Obara, Ichiro & Park, Jaeok, 2017. "Repeated games with general discounting," Journal of Economic Theory, Elsevier, vol. 172(C), pages 348-375.
    3. Nina Anchugina, 2015. "A simple framework for the axiomatization of exponential and quasi-hyperbolic discounting," Papers 1511.06454, arXiv.org.
    4. repec:kap:theord:v:83:y:2017:i:3:d:10.1007_s11238-017-9603-2 is not listed on IDEAS
    5. 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.
    6. 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.
    7. Webb, Craig S., 2016. "Continuous quasi-hyperbolic discounting," Journal of Mathematical Economics, Elsevier, vol. 64(C), pages 99-106.
    8. Daniele Pennesi, 2015. "Uncertain discount and hyperbolic preferences," THEMA Working Papers 2015-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    9. 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.
    10. 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.
    11. repec:eee:jeborg:v:145:y:2018:i:c:p:352-369 is not listed on IDEAS
    12. D. Pennesi, 2016. "Intertemporal discrete choice," Working Papers wp1061, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Mackenzie, Andrew, 2018. "A foundation for probabilistic beliefs with or without atoms," Research Memorandum 013, Maastricht University, Graduate School of Business and Economics (GSBE).
    14. 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.
    15. 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.
    16. Lu, Shih En, 2016. "Models of limited self-control: Comparison and implications for bargaining," Economics Letters, Elsevier, vol. 145(C), pages 186-191.
    17. Lu, Shih En, 2016. "Self-control and bargaining," Journal of Economic Theory, Elsevier, vol. 165(C), pages 390-413.

    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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