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Discount functions and self-control problems

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  • Caliendo, Frank N.
  • Findley, T. Scott

Abstract

In this paper we propose a new strategy for comparing the behavior of a hyperbolic discounter who possesses self-control problems to an exponential discounter who does not. Our strategy controls for inherent differences in overall levels of impatience across discount functions, which thereby allows us to isolate the pure effect of self-control problems. We argue that self-control problems, in their pure form as we identify them, can have a very surprising effect on intertemporal choices. Our method reveals that differences in decision making that could be attributed to self-control problems are at least partly (and perhaps entirely) just an artifact of an uncontrolled comparison.

Suggested Citation

  • Caliendo, Frank N. & Findley, T. Scott, 2014. "Discount functions and self-control problems," Economics Letters, Elsevier, vol. 122(3), pages 416-419.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:3:p:416-419
    DOI: 10.1016/j.econlet.2013.12.035
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    Cited by:

    1. Salvador Cruz Rambaud & Ana María Sánchez Pérez, 2020. "Discounted and Expected Utility from the Probability and Time Trade-Off Model," Mathematics, MDPI, vol. 8(4), pages 1-17, April.
    2. Minwook Kang, 2019. "Pareto-improving tax policies under hyperbolic discounting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(3), pages 618-660, June.
    3. repec:grz:wpaper:2014-04 is not listed on IDEAS
    4. Farzin, Y. Hossein & Wendner, Ronald, 2014. "The Time Path of the Saving Rate: Hyperbolic Discounting and Short-Term Planning," Climate Change and Sustainable Development 178243, Fondazione Eni Enrico Mattei (FEEM).
    5. Strulik, Holger & Trimborn, Timo, 2018. "Hyperbolic discounting can be good for your health," Journal of Economic Psychology, Elsevier, vol. 69(C), pages 44-57.
    6. Kirill Borissov & Mikhail Pakhnin & Ronald Wendner, 2020. "Naive Agents with Quasi-hyperbolic Discounting and Perfect Foresight," EUSP Department of Economics Working Paper Series 2020/03, European University at St. Petersburg, Department of Economics.
    7. Achim Voss & Jörg Lingens, 2018. "What's the damage? Environmental regulation with policy‐motivated bureaucrats," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(4), pages 613-633, August.
    8. Borissov, Kirill & Pakhnin, Mikhail & Wendner, Ronald, 2021. "The Neoclassical Growth Model with Time-Inconsistent Decision Making and Perfect Foresight," MPRA Paper 108336, University Library of Munich, Germany.
    9. Strulik, Holger, 2015. "Hyperbolic discounting and endogenous growth," Economics Letters, Elsevier, vol. 126(C), pages 131-134.
    10. Kang, Minwook, 2021. "Aggregate savings under quasi-hyperbolic versus exponential discounting," Economics Letters, Elsevier, vol. 207(C).
    11. Borissov, Kirill & Pakhnin, Mikhail & Wendner, Ronald, 2024. "General equilibrium and dynamic inconsistency," Journal of Mathematical Economics, Elsevier, vol. 114(C).
    12. Findley, T. Scott & Caliendo, Frank N., 2015. "Time inconsistency and retirement choice," Economics Letters, Elsevier, vol. 129(C), pages 4-8.
    13. Calcott, Paul & Petkov, Vladimir, 2024. "How innocuous is it to approximate globally decreasing impatience with quasi-hyperbolic discounting?," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    14. Kang, Minwook & Kim, Eungsik, 2024. "Present bias and endogenous growth," Economics Letters, Elsevier, vol. 236(C).
    15. Holger Strulik, 2021. "Hyperbolic discounting and the time‐consistent solution of three canonical environmental problems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(3), pages 462-486, June.
    16. Salvador Cruz Rambaud & María José Muñoz Torrecillas, 2016. "Measuring Impatience in Intertemporal Choice," PLOS ONE, Public Library of Science, vol. 11(2), pages 1-17, February.
    17. Strulik, Holger, 2016. "Limited self-control and long-run growth," Mathematical Social Sciences, Elsevier, vol. 83(C), pages 1-8.
    18. Paul Calcott & Vladimir Petkov, 2022. "Excessive consumption and present bias," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(1), pages 113-134, July.
    19. Findley, T. Scott, 2015. "Hyperbolic memory discounting and the political business cycle," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 345-359.
    20. Choi, Yoonseok, 2017. "Revisiting the effect of a technology shock on hours," Economics Letters, Elsevier, vol. 157(C), pages 67-70.

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    More about this item

    Keywords

    Discounting; Intertemporal choice; Saving; Self-control problems;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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