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Axiomatization and Measurement of Quasi-hyperbolic Discounting

  • J.L. {Montiel Olea}
  • Tomasz Strzalecki

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.

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Paper provided by Harvard University OpenScholar in its series Working Paper with number 8367.

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Handle: RePEc:qsh:wpaper:8367
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