A note on three factor model of discounting

Ito Seiro

No 605, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: In Montiel Olea and Strzalecki (2014), authors have axiomatically developed an algorithm to infer the parameters of beta-delta model of cognitive bias (present and future biases). While this is extremely useful, it allows the implied beta to become very large when the response is impatient in the future choices relative to present choices, i.e., when there is a strong future bias. I modify the model to further exponentiate the functional form to get more reasonable beta values.

Keywords: Consumption; Consumers; Psychology; Discount factor; Experimental method (search for similar items in EconPapers)
JEL-codes: C91 D99 (search for similar items in EconPapers)
Date: 2016-05-01
New Economics Papers: this item is included in nep-net and nep-neu
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 605. 2016-05-01

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