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People Do Not Discount Heavily in Strategic Settings, but They Believe Others Do

Cary Deck and Salar Jahedi ()
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Salar Jahedi: RAND Corporation

Working Papers from Chapman University, Economic Science Institute

Abstract: Several studies have shown that people greatly discount future benefits and costs. However, most of the direct laboratory evidence of this phenomenon has focused on individual choice experiments. This paper investigates the degree to which the timing of payments affects behavior in four commonly studies strategic settings: a Prisoner's Dilemma game, a Stag-Hunt game, a First Price Auction and a Second Price Auction. In all four settings, a two week delay in payoffs has a comparable effect to a 20% reduc- tion in current payoffs. A follow-up study suggests that it is an individual's strategic response to the anticipated discount rate of others that might be driving this behavior rather than a participant's own discount factor.

Keywords: Strategic Behavior; Time Discounting; Experiments. (search for similar items in EconPapers)
Pages: 24 pages
Date: 2014
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-hpe
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