At first glance, it seems to make sense to conclude that when a 1 dollar reward tomorrow is equivalent to a D < 1 dollar reward today, the day-after-tomorrow’s 1 dollar reward would be equivalent to D ·D = D dollars today, and, in general, a reward after time t is equivalent to D(t) = D dollars today. This exponential discounting function D(t) was indeed proposed by the economists, but it does ...

We assume that perfectly patient agents estimate the value of future events by generating noisy, unbiased simulations and combining those signals with priors to form posteriors. These posterior expectations exhibit as-if discounting : agents make choices as if they were maximizing a stream of known utils weighted by a discount function, D(t). This as-if discount function reflects the fact that ...

Anomalies in intertemporal choice (e.g. hyperbolic discounting, subadditive discounting, a sign effect, a magnitude effect, and a delay-speedup asymmetry) have been investigated in neuroeconomics and behavioral neuroeconomics. In this study we propose a “tempospect” theory of intertemporal choice which can account for these anomalies in intertemporal choice. The key features of the present theo...

A generalized version of the capital management problem posed in a classic paper by R. H. Strotz is analyzed for the case of the “naive” planner who fails to anticipate any impending change in his own preferences. By imposing progressively stronger restrictions on the primitives of the problem — namely, the planner’s discounting function, his utility index function, and the investment technolog...

We consider a discounted utility model that has two components. (1) The instantaneous utility is of the prospect theory form, thus, allowing for reference dependent outcomes. (2) The discount function embodies a ‘reference time’to which all future outcomes are discounted back to, hence, the name, reference time theory. We allow the discount function to exhibit declining impatience, as in hyperb...

The authors demonstrate that people discount delayed outcomes as a result of perceived changes over time in supplies of slack. Slack is the perceived surplus of a given resource available to complete a focal task. The present research shows that, in general, people expect slack for time to be greater in the future than in the present. Typically, this expectation of growth of slack in the future...

In this paper we study the optimal forest conservation policy by a hyperbolically discounting society. Society comprises a series of non-overlapping imperfectly altruistic generations each represented by its own government. Under uncertainty about future pay-offs we determine, as solution of an intergenerational dynamic game, the optimal timing of irreversible harvest. Earlier harvest occurs an...

The two most influential models in delay discounting research have been the exponential (E) and hyperbolic (H) models. We develop a new methodology to design binary choice questions such that exponential and hyperbolic discount rates can be purposefully manipulated to make their rate parameters orthogonal (Pearson’s R = 0), negatively correlated (R = –1), positively correlated (R = +1), or to h...

A large literature has used choice experiments involving time-dated monetary rewards, to test whether time discounting is exponential or hyperbolic, with mixed results. One explanation, proposed by the psychologist Daniel Read (2001), is that the observed choice patterns reflect a type of framing effect, known as sub-additivity, rather than hyperbolic or exponential discounting. An alternative ...