Intertemporal choice and the magnitude effect

Jawwad Noor

Games and Economic Behavior, 2011, vol. 72, issue 1, 255-270

Abstract: A robust finding in experiments on time preference is the magnitude effect: subjects tend to be more patient towards larger rewards. Using a calibration theorem, we argue against standard curvature-based explanations for the finding. We axiomatize a model of preferences over dated rewards that generalizes the standard exponential discounting model by permitting the discount factor to depend on the reward being discounted. The model is shown to behaviorally subsume the hyperbolic discounting model as a special case. When embedded in a sequential bargaining game the model gives rise to multiple stationary subgame perfect equilibria. There may exist equilibria in which the first mover gets a smaller share despite also being the more patient player.

Keywords: Discounting; Magnitude; effect; Hyperbolic; discounting; Preference; reversals; Calibration; theorem; Bargaining (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899-8256(10)00105-3
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Intertemporal Choice and the Magnitude Effect (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:72:y:2011:i:1:p:255-270

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().