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2016 | OriginalPaper | Chapter

3. Hyperbolic Discounting and Self-Destructive Behaviors

Author : Shinsuke Ikeda

Published in: The Economics of Self-Destructive Choices

Publisher: Springer Japan

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Abstract

In the previous chapter, I explained that people’s degrees of impatience are affected by various choice conditions and frames, all of which cause a variety of anomalous phenomena in their intertemporal choices and behaviors that traditional economics cannot explain. In this chapter, I shall deal with hyperbolic discounting or present bias. As explained in Chap. 1, under hyperbolic discounting, more immediate gratifications are discounted at higher discount rates, and people are less patient in waiting for less delayed rewards.

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previous chapter Varying Impatience

next chapter Self-Control Problems of the Dual Self

For two alternative rewards A and B with different magnitudes R _A, R _B and different delays T _A, T _B, a simple version of the matching law describes relative preferences for A over B, V _A/V _B, as \( {V}_A/{V}_B=K{R}_A\ {T}_B/\left({R}_B\ {T}_A\right) \), where K is a positive constant.

The issue of psychological or subjective time has been attracting the attention of economists. For example, Samuelson (1976) proposed axiomatic conditions for the existence of subjective time. Uzawa (1968) constructed consumers’ subjective time from the personal discount rate. Sato and Ramachandran (2014, Chap. 8) and Sato (2015) explained a downward trend of Japan’s income-wealth ratio after World War II by hypothesizing that the subjective time of the Japanese people expanded during the period.

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Title: Hyperbolic Discounting and Self-Destructive Behaviors
Author: Shinsuke Ikeda
Publisher: Springer Japan
Book: The Economics of Self-Destructive Choices
Print ISBN: 978-4-431-55792-0

Electronic ISBN: 978-4-431-55793-7

Copyright Year: 2016
DOI: https://doi.org/10.1007/978-4-431-55793-7_3