Axiomatization and Measurement of Quasi-Hyperbolic Discounting

José Luis Montiel Olea and Tomasz Strzalecki

The Quarterly Journal of Economics, 2014, vol. 129, issue 3, 1449-1499

Abstract: This article provides an axiomatic characterization of quasi-hyperbolic discounting and a more general class of semi-hyperbolic preferences. We impose consistency restrictions directly on the intertemporal trade-offs by relying on what we call “annuity compensations.” Our axiomatization leads naturally to an experimental design that disentangles discounting from the elasticity of intertemporal substitution. In a pilot experiment we use the partial identification approach to estimate bounds for the distributions of discount factors in the subject pool. Consistent with previous studies, we find evidence for both present and future bias. JEL Codes: C10, C99, D03, D90.

Date: 2014
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Working Paper: Axiomatization and Measurement of Quasi-Hyperbolic Discounting (2014)
Working Paper: Axiomatization and Measurement of Quasi-hyperbolic Discounting
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