Hypobolic Discounting and Willingness-to-Wait

17 Pages Posted: 18 Jun 2012  

David Eil

Interdisciplinary Center for Economic Science

Date Written: June 1, 2012

Abstract

Experimental and field research has shown that individuals often exhibit time inconsistent preferences. Often this is in the direction of “hyperbolic” or quasi-hyperbolic discounting. That is, individuals have a steeper discount rate for a given delay length when that delay comes sooner. This paper presents an experiment that tests this hypothesis with a novel choice task. Instead of being asked how much money today makes them indifferent between some amount later, subjects are asked how long they would be willing to wait to be indifferent between some amount sooner and some larger amount later. In this new task, many subjects exhibit “hypobolic” discounting, the opposite of the standard finding. This result does not appear to be a consequence of payout risk. The result suggests that hyperbolic discounting may be subject to the framing of choices, and therefore not purely an aspect of preferences.

Keywords: Uncertainty

JEL Classification: D81, D90

Suggested Citation

Eil, David, Hypobolic Discounting and Willingness-to-Wait (June 1, 2012). GMU Working Paper in Economics No. 12-28. Available at SSRN: https://ssrn.com/abstract=2087098 or http://dx.doi.org/10.2139/ssrn.2087098

David Eil (Contact Author)

Interdisciplinary Center for Economic Science ( email )

400P Truland Building
George Mason University
Fairfax, VA 22030
United States

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