Evolution as Learning Yields Hyperbolic Discounting

James Woods

GE, Growth, Math methods from EconWPA

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.

Keywords: discounting; genetic algorithms; learning (search for similar items in EconPapers)
JEL-codes: D91 (search for similar items in EconPapers)
Date: 2003-09-01, Revised 2003-12-28
Note: Type of Document - Acrobat PDF; prepared on Linux Kile; to print on PostScript; pages: 23; figures: included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpge:0309001

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