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People Do Not Discount Heavily in Strategic Settings, but They Believe Others Do

Author

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  • Cary Deck

    (University of Arkansas and Chapman University)

  • Salar Jahedi

    (RAND Corporation)

Abstract

Several studies have shown that people greatly discount future benefits and costs. However, most of the direct laboratory evidence of this phenomenon has focused on individual choice experiments. This paper investigates the degree to which the timing of payments affects behavior in four commonly studies strategic settings: a Prisoner's Dilemma game, a Stag-Hunt game, a First Price Auction and a Second Price Auction. In all four settings, a two week delay in payoffs has a comparable effect to a 20% reduc- tion in current payoffs. A follow-up study suggests that it is an individual's strategic response to the anticipated discount rate of others that might be driving this behavior rather than a participant's own discount factor.

Suggested Citation

  • Cary Deck & Salar Jahedi, 2014. "People Do Not Discount Heavily in Strategic Settings, but They Believe Others Do," Working Papers 14-11, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:14-11
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    References listed on IDEAS

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    Keywords

    Strategic Behavior; Time Discounting; Experiments.;
    All these keywords.

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