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Duke Economics Working Paper #03-03

Reconsidering the Experimental Evidence for Quasi-Hyperbolic Discounting


Gregory Besharov and Bentley Coffey

Abstract

The results of experiments on choices for rewards across time are claimed as support for the quasi-hyperbolic discounting model of consumption preferences. In fact, the evidence could be generated by agents who discount exponentially. Our theoretical results suggest that when experimental rewards are financial, quasi-hyperbolic agents choose to maximize wealth. When rewards are not financial, the choices of even exponential agents cannot be theoretically restricted because of complementarities, across goods and time, and because of learning that occurs between decisions. Since generalizing preferences from exponential to quasi-hyperbolic is neither necessary nor sufficient to generate the experimental results, there is a fundamental identification problem.

Key words: hyperbolic discounting, quasi-hyperbolic preferences

JEL: D91

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22 pages

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