The personal wealth importance to the intertemporal choice

José Cláudio do Nascimento

Physica A: Statistical Mechanics and its Applications, 2021, vol. 565, issue C

Abstract: In behavioral finance, collecting data on amounts and delays has helped research time preference. But, could other data support new conclusions about the discount dynamics? This paper considers only the physical aspects necessary to choose between payments sooner or later. So it is verified that personal wealth is one of the elements that influence the discount shape. Specifically, when the impact of rewards on wealth is low, the dynamics can be simplified due to the low contrast between time averages, allowing different discount functions to be generalized by the q-exponential function. Therefore, the wealth (or income) can be a relevant factor in individuals’ behavior because it influences intertemporal choice’s dynamical aspects.

Keywords: Hyperbolic discounting; Exponential discounting; q-exponential; Discounted utility model; Intertemporal choice; Time preference; Simple interest; Compound interest (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:565:y:2021:i:c:s0378437120308578

DOI: 10.1016/j.physa.2020.125559

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