Concave utility, transaction costs, and risk in measuring discounting of delayed rewards.

Full Abstract

Research has consistently found that the decline in the present values of delayed rewards as delay increases is better fit by hyperbolic than by exponential delay-discounting functions. However, concave utility, transaction costs, and risk each could produce hyperbolic-looking data, even when the underlying discounting function is exponential. In Experiments 1 (N = 45) and 2 (N = 103), participants placed bids indicating their present values of real future monetary rewards in computer-based 2nd-price auctions. Both experiments suggest that utility is not sufficiently concave to account for the superior fit of hyperbolic functions. Experiment 2 provided no evidence that the effects of transaction costs and risk are large enough to account for the superior fit of hyperbolic functions.

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Author information

Author/s: Kirby, Kris N (KN); Santiesteban, Mariana (M);

Affiliation: Department of Psychology, Williams College, Williamstown, Massachusetts 01267, USA. kkirby(-atsign-)williams.edu

Grants: MH55262 (Agency:NIMH NIH HHS)

Journal and publication information

Publication Type: Journal Article; Research Support, U.S. Gov't, P.H.S.

Journal: Journal of experimental psychology. Learning, memory, and cognition (J Exp Psychol Learn Mem Cogn), published in United States. (Language: eng)

Reference: 2003-Jan; vol 29 (issue 1) : pp 66-79

Dates: Created 2003/01/28; Completed 2003/05/01; Revised 2007/11/14;

PMID: 12549584, status: MEDLINE (last retrieval date: 12/26/2008)

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MeSH headings (categories)

This article was linked to the MESH Headings shown below.

Adolescent
Adult
Choice Behavior
Female
Humans
Male

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