Noisy coding of time and reward discounting
Ferdinand Vieider ()
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration
I present a model generating delay-discounting from noisy mental representations of time delays. The optimal combination of noisy signals about time delays with prior information results in a stochastic model predicting discounting to exhibit present-bias, but to be stationary and delaydependent once up-front delays are introduced. The derivation from an optimal encoding-decoding process sidesteps arbitrariness concerns voiced about earlier models. Data collected in an experiment support the need for separate but interacting parameters to capture present-bias and delaydependence. The account explains why non-trivial discounting is routinely observed in experiments using monetary rewards instead of consumption.
Pages: 36 pages
New Economics Papers: this item is included in nep-exp, nep-ore and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:21/1036
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