Document Type

Pre-Print

Publication Date

2003

Subjects

Hyperbolic discounting, Economics -- Research -- United States

Abstract

Learning is modeled as an infection, which jumps from person to person. The rate of infection mimics individual discount rates and induces savings behavior on its own. It is shown that the apparent discount rate, the combination of the agents’ true discount rate and the infection rate, decreases over time and approaches the agents’ true discount rate. This decrease, known as hyperbolic discounting, is consistent with what is observed in psychology studies, while the limiting case, exponential discounting, is consistent with market level observations. This model closes the gap between individual and market level observations of discounting behavior without explicitly assuming the two kinds of discounting nor relying on commitment mechanisms.

Persistent Identifier

http://archives.pdx.edu/ds/psu/16541

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Economics Commons

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