Hyperbolic Discounting and the Standard ModelNo WP2007-028, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics Abstract: Experiments on time preference document numerous .ndings that seem to con- tradict the standard model of intertemporal choice. These .ndings are based on how subjects choose between delayed rewards. This paper shows that if subjects integrate such rewards with their consumption plans, and expect changes in future consump- tion, then except for violations of basic properties like transitivity, the standard model (with CRRA utility) can rationalize all the popular experimental .ndings: preference reversals, dynamic inconsistency, hyperbolic discounting, magnitude e¤ect, sign e¤ect, delay-speedup asymmetry etc. It is demonstrated formally that the standard model has no peculiar testable implications for subjects.preferences between delayed money rewards, which is the data of typical experiments. A testable implication of the model is derived in the richer setting with risky prospects as rewards. Keywords: Discounted Utility; Exponential discounting; Preference Reversals; Dy- namic Inconsistency; Hyperbolic discounting; Sign E¤ect; Magnitude E¤ect. (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bos:wpaper:wp2007-028 Access Statistics for this paper More papers in Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics Contact information at EDIRC. |
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