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Is it "Economics and Psychology"?: the Case of Hyperbolic Discounting

Author

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  • Rubinstein, A.

Abstract

The paper questions the methodology of "economics and psychology". It focuses on the case of hyperbolic discounting. Using some experimental results, I argue that the same sort of evidence which rejects the standard constant discount utility functions can just as easily reject hyperbolic discounting as well. Futhermore, a decision-making procedure based on similarity relation better explains the observations and is more intuitive. The paper concludes that combining "economics and psychology" requires opening the black box of decision-makers rather than modifying funcional forms.

Suggested Citation

  • Rubinstein, A., 2000. "Is it "Economics and Psychology"?: the Case of Hyperbolic Discounting," Papers 00-21, Tel Aviv.
    • Handle: RePEc:fth:teavfo:00-21
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    Cited by:

    1. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
    2. Efe A Ok & Yusufcan Masatlioglu, 2003. "A General Theory of Time Preferences," Levine's Bibliography 234936000000000089, UCLA Department of Economics.
    3. Paola Manzini, 2001. "Time preferences: do they matter in bargaining?," Experimental 0106001, University Library of Munich, Germany.
    4. Juan D. Carrillo & Mathias Dewatripont, 2008. "Promises, Promises, ..," Economic Journal, Royal Economic Society, vol. 118(531), pages 1453-1473, August.
    5. Manzini, Paola & Mariotti, Marco, 2006. "Two-Stage Boundedly Rational Choice Procedures: Theory and Experimental Evidence," IZA Discussion Papers 2341, Institute of Labor Economics (IZA).
    6. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    7. Paola Manzini & Marco Mariotti & Luigi Mittone, 2010. "Choosing monetary sequences: theory and experimental evidence," Theory and Decision, Springer, vol. 69(3), pages 327-354, September.
    8. Schilizzi, Steven, 2003. "Deciding with long-term environmental impacts: what role for discounting?," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58206, Australian Agricultural and Resource Economics Society.
    9. Manzini Paola & Mariotti Marco, 2006. "A Vague Theory of Choice over Time," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-29, October.
    10. Nocke, Volker & Peitz, Martin, 2003. "Hyperbolic discounting and secondary markets," Games and Economic Behavior, Elsevier, vol. 44(1), pages 77-97, July.
    11. Y. Biondi, 2011. "Cost of capital, discounting and relational contracting: endogenous optimal return and duration for joint investment projects," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4847-4864.
    12. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    13. Katarina Kostelic, 2021. "Temporal and Spatial Perception in Purchase Choice," Eurasian Journal of Business and Management, Eurasian Publications, vol. 9(2), pages 100-122.
    14. Savorelli, Luca, 2008. "Know Thyself: Self Awareness and Utility Misprediction in Discounting Models of Intertemporal Choice," AICCON Working Papers 57-2008, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    15. Shi Yingnan & Xinghao Li, 2017. "The Time Preference of Chinese Tend to be Less Affected by Positive Emotions: As Proved by an Experimental Study," Journal of Economics and Behavioral Studies, AMH International, vol. 9(4), pages 201-216.
    16. Rubinstein, Ariel, 2001. "A theorist's view of experiments," European Economic Review, Elsevier, vol. 45(4-6), pages 615-628, May.
    17. Samuelson,L. & Swinkels,J.M., 2001. "Information and the evolution of the utility function," Working papers 6, Wisconsin Madison - Social Systems.

    More about this item

    Keywords

    PSYCHOLOGY ; ECONOMICS ; EXPERIMENTATION ; DECISION MAKING;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

    Statistics

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