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Hyperbolic Discounting Models in Prescriptive Theory of Intertemporal Choice
Ahlbrecht, Martin | Weber, Martin
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 115 (1995), Iss. 4 : pp. 535–568
1 Citations (CrossRef)
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Article Details
Ahlbrecht, Martin
Weber, Martin
Cited By
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Impulsive decision making and working memory.
Hinson, John M.
Jameson, Tina L.
Whitney, Paul
Journal of Experimental Psychology: Learning, Memory, and Cognition, Vol. 29 (2003), Iss. 2 P.298
https://doi.org/10.1037/0278-7393.29.2.298 [Citations: 238]
Abstract
This paper argues that hyperbolic discounting models can be used in prescriptive theory of intertemporal choice whenever decisions are binding for the future. First, we derive an axiomatic basis that unifies standard and hyperbolic discounting models. The decision weights are written as 1/(1 + i)^a(t) is a time perception function. The standard discounting model corresponds to a linear a whereas hyperbolic models refer to nonlinear as. Second, we make a qualification to an inconsistency argument brought forward against hyperbolic discounting models. We show that the strength of this argument, and thus, the applicability of hyperbolic models to prescriptive theory, depends on the decision context.