Littérature scientifique sur le sujet « Hyperbolic preference »

AbstractThe paper surveys over twenty models of delay discounting (also known as temporal discounting, time preference, time discounting), that psychologists and economists have put forward to explain the way people actually trade off time and money. Using little more than the basic algebra of powers and logarithms, I show how the models are derived, what assumptions they are based upon, and how different models relate to each other. Rather than concentrate only on discount functions themselves, I show how discount functions may be manipulated to isolate rate parameters for each model. This approach, consistently applied, helps focus attention on the three main components in any discounting model: subjectively perceived money; subjectively perceived time; and how these elements are combined. We group models by the number of parameters that have to be estimated, which means our exposition follows a trajectory of increasing complexity to the models. However, as the story unfolds it becomes clear that most models fall into a smaller number of families. We also show how new models may be constructed by combining elements of different models.The surveyed models are: Exponential; Hyperbolic; Arithmetic; Hyperboloid (Green & Myerson, Rachlin); Loewenstein and Prelec Generalized Hyperboloid; quasi-Hyperbolic (also known as β-δ discounting); Benhabib et al’s fixed cost; Benhabib et al’s Exponential / Hyperbolic / quasi-Hyperbolic; Read’s discounting fractions; Roelofsma’s exponential time; Scholten and Read’s discounting-by-intervals (DBI); Ebert and Prelec’s constant sensitivity (CS); Bleichrodt et al.’s constant absolute decreasing impatience (CADI); Bleichrodt et al.’s constant relative decreasing impatience (CRDI); Green, Myerson, and Macaux’s hyperboloid over intervals models; Killeen’s additive utility; size-sensitive additive utility; Yi, Landes, and Bickel’s memory trace models; McClure et al.’s two exponentials; and Scholten and Read’s trade-off model.For a convenient overview, a single “cheat sheet” table captures the notation and essential mathematics behind all but one of the models.

Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper presents simulations of the savings and asset allocation choices of households with hyperbolic preferences. The behavior of the hyperbolic households is compared to the behavior of exponential households. The hyperbolic households borrow much more frequently in the revolving credit market. The hyperbolic households exhibit greater consumption income comovement and experience a greater drop in consumption around retirement. The hyperbolic simulations match observed consumption and balance sheet data much better than the exponential simulations.

Abstract: A preference reversal is observed when a preference for a larger-later (LL) reward over a smaller-sooner (SS) reward reverses as both rewards come closer in time. Preference reversals are common in everyday life and in the laboratory and are often claimed to support hyperbolic delay-discounting models which, in their simplest form, can model reversals with only one free parameter. However, it is not clear if the temporal location of preference reversals can be predicted a priori. Studies testing model predictions have not found support for them, but they overlooked the well-documented effect of reinforcer magnitude on discounting rate. Therefore, we directly tested hyperbolic and exponential model predictions in a pre-registered study by assessing individual discount rates for two reinforcer magnitudes. We then made individualized predictions about pairs of choices between which preference reversals should occur. With 107 participants, we found (1) little evidence that hyperbolic and exponential models could predict the temporal location of preference reversals, (2) some evidence that hyperbolic models had better predictive performance than exponential models, and (3) in contrast to many previous studies, that exponential models generally produced superior fits to the observed data than hyperbolic models.

The pair comparison design for distinguishing between stimuli located on the same natural or hypothesized linear continuum is used both when the response is a personal preference and when it is an impersonal judgment. Appropriate models which complement the different responses have been proposed. However, the models most appropriate for impersonal judgments have also been described as modeling choice, which may imply personal preference. This leads to potential confusion in interpretation of scale estimates of the stimuli, in particular whether they reflect a substantive order on the variable or reflect a characteristic of the sample which is different from the substantive order on the variable. Using Thurstone’s concept of a discriminal response when a person engages with each stimulus, this article explains the overlapping and distinctive relationships between models for pair comparison designs when used for preference and judgment. In doing so, it exploits the properties of the relatively new hyperbolic cosine model which is not only appropriate for modeling personal preferences but has an explicit mathematical relationship with models for impersonal judgments. The hyperbolic cosine model is shown to be a special case of a more general form, referred to in parallel with Thurstone’s Law of Comparative Judgment, as a specific law of comparative preference. Analyses of two real data sets illustrate the differences between the models most appropriate for personal preferences and impersonal judgments in a pair comparison design.

As has long been known, though prevalent in everyday discourse across cultures, hyperbole is a neglected figurative language in the linguistic and/or literary sphere. In this talk, we propose a semantic taxonomy of hyperbole in American and British modern war poetry showing how this taxonomy helps readers figure out the poet’s meaning on a deeper level via a variety of hyperboles. The main objectives are to (1) identify the elements of such a trope in the corpora, (2) approach a semantic taxonomy of hyperbolic elements, and (3) come up with the true hidden messages and nature of the trope in accordance with the typology of the semantic field under which the trope is embraced. The corpora consist of two impressive poems – ‘Abu Ghraib’ by Curtis D. Bennett (American), and ‘A Message from Tony Blair to the People of Iraq by David Roberts (British). Findings indicate that both the evaluative and the quantitative dimensions are key characteristics that often coincide and should, therefore, be included in every interpretation of the figurative hyperbolic language in war poetry. A strong preference is also observed for negative effects, auxesis, and absolute savage in the corpora, though the trope sounds positive on the surface.

Abstract Studies on the public’s implicit discount rate in the willingness to pay for environmental amenities have mostly employed contingent valuation surveys. We investigate respondents’ time preferences using choice experiments with four payment schedules in a split-sample design in the context of mire conservation. We first examine preference and taste heterogeneity among respondents, finding them to a large extent independent of payment schedules. Next we use an endogenous approach to jointly estimate the implicit discount rates and preferences using choice experiments data. We explore exponential and hyperbolic discounting model specifications. We find insensitivity to the length of the payment period and support for hyperbolic discounting. Furthermore, we provide policy relevant valuation results concerning mire conservation.

We study consumption behavior, retirement decisions, and endogenous growth within a dynamic equilibrium when individuals have present-biased preferences. Compared to individual with exponential preferences, individual with hyperbolic preferences will choose to retire early for present-biased preferences but to delay retirement for the initial time preference rate. We extend the benchmark equilibrium model to age-dependent survival law and solve numerically the equilibrium effects. It shows that, at the same age, the consumption-capital ratio may have slightly positive effect on increasing life expectancy before retirement but has a significantly positive effect on it after retirement.

PurposeUsing the hyperbolic discounting approach in qualitative manner, the purpose of this paper is to explore the linkage of the time preference bias towards the too early execution of strategic focused planning. The paper also investigates the role of psychological bias in explaining the early execution.Design/methodology/approachThis research use qualitative methods to explore the role of hyperbolic discounting in driving the psychological bias towards too early strategic scenario planning, and its rationalization. The authors conducted a face‐to‐face survey going door‐to‐door of the small to medium‐sized enterprises (SMEs). The samples in this research are Indonesian SMEs from the northern part of Sumatra.FindingsThis research found most of the SMEs' managers are time preference biased due to hyperbolic discounting. This hyperbolic discounting awoke manager's psychological bias and resulted in too early decision making. This psychological bias might be due to prospect theory, or the representative effect, or framing bias, or the adaptive bias.Research limitations/implicationsThe sample is only taken from Northern part of Indonesia. To have a robust generalization, the research should be conducted in the whole of Indonesia.Practical implicationsThis paper can be used by practitioners to understand their behaviour towards strategic decision making. Further, practitioners will know if their time preference bias will not generate better result.

Risk and time are intertwined. The present is known while the future is inherently risky. This is problematic when studying time preferences since uncontrolled risk can generate apparently present-biased behavior. We systematically manipulate risk in an intertemporal choice experiment. Discounted expected utility performs well with risk, but when certainty is added common ratio predictions fail sharply. The data cannot be explained by prospect theory, hyperbolic discounting, or preferences for resolution of uncertainty, but seem consistent with a direct preference for certainty. The data suggest strongly a difference between risk and time preferences. (JEL C91 D81 D91)

The thesis consists of a summary and four papers, concerned with food consumption, behavior associated with overconsumption of food and analysis of the economic policy reforms designed to improve health.

Paper [I] estimates a hedonic price model on breakfast cereal, crisp bread and potato product data. The purpose is to examine the marginal implicit prices for food characteristics associated with health. A trade-off exists between health and taste. For instance, sugar, salt and fat are tasty but can be unhealthy if overconsumed; whereas fiber is unhealthy if underconsumed. If the marginal implicit price for sugar is negative, consumers value health over its taste. Our results are the marginal implicit price for sugar is negative for breakfast cereals and crisp bread—consumers value health over the taste of sugar. For salt, we find the opposite—a positive marginal implicit price, suggesting people value its taste over health. For fat, we find a negative marginal implicit price of fat in breakfast cereals and potato products containing salt, whereas we find a positive marginal implicit price of fat in hard bread and potato products that contain no salt. For the one healthy characteristic, fiber, we find a negative marginal implicit price in breakfast cereals and a positive implicit price in hard bread.

Paper [II] uses a general equilibrium model to derive the optimal policy if people overconsume unhealthy food due to self-control problems. Individuals lacking self-control have a preference for immediate gratification, at the expense of future health. We show the optimal policy to help individuals with self-control problems to behave rationally is a combination of subsidies for the health capital stock and the physical capital stock.

Paper [III] estimates a demand system for grain consumption based on household panel data and detailed product characteristics, and simulate the effect on grain consumption of economic policy reforms designed to encourage a healthier grain diet. Our results imply it is more cost-efficient to subsidize the fiber content than to subsidize products rich in fiber given the goal to increase the fiber intake of the average Swedish household. Our results also imply subsidies alone give rise to an increase in fiber, and to other unhealthy nutrients. Also, subsidies alone have negative effects on the budget. We therefore simulate the effect of policy reforms in which the subsidies are funded either by taxes on the content of unhealthy nutrients or by taxes on products that are overconsumed. Our results suggest that price instruments need to be substantial to change consumption. For instance, removing the VAT on products rich in fiber has little effect on consumption.

Paper [IV] explores habit persistence in breakfast cereal purchases. To perform the analysis, we use a mixed multinomial logit model, on household panel data on breakfast cereal purchases. If habit persistence in consumption is strong, short and long-run responses to policy reforms will differ. Our results are breakfast cereal purchases are strongly associated with habit persistence. Our results also imply preferences for breakfast cereals are heterogeneous over households and the strength of habit persistence is similar over educational and income groups.

Gaps in financial access remain stark in the largest part of developing countries and have relevant consequences on poor households’ economic decisions, such as credit, saving and risk management. Lack of availability of formal financial services provided by either the market or public authorities (e.g in case of health insurance) have been compensated by the activity of informal groups, associations and arrangements. Old and new forms of community-based groups have been largely documented in most of developing countries and are shown to be active in several crucial economic domains. They have different levels of institutionalization as they can simply rely on social norms or can have rules and a certain degree of formalization concerning e.g. selection criteria, enforcement, sanctions. They all have in common the voluntary participation of people from the same community (village, neighbourhood, people of the same profession), the delivery of services to members, the non-profit character, the underpinning values of solidarity and mutual help. Some examples of community-based groups in Sub-Saharan Africa are analysed in this thesis: Rotating Saving and Credit Associations (roscas), funeral groups and mutual health organizations (MHOs). The importance of studying community-based arrangements lies in the premise that interventions at the level of a local community can deliver more effective and equitable development. Moreover, examining the mechanics of the informal market is very important for two reasons. First, the strength of the informal market is important for measuring and predicting how effective specific formal sector interventions could be, in the perspective of scaling-up. Second, lessons learned in the informal markets can help shape policy in the formal (Karlan and Morduch 2009). In chapter 1, drawing on data from a household survey in urban Benin1, we examine membership in two types of informal groups that display the characteristics of a commitment device: rotating savings and credit associations (roscas) and funeral groups. We investigate whether agents displaying time-inconsistent preferences are sophisticated enough to commit themselves through taking part in such groups. We provide evidence indicating that women who are hyperbolic are more likely to join these groups and to save more through them, but men displaying similar preferences appear naïve with regards membership. Moreover, we find that hyperbolic agents, irrespective of their gender, tend to restrain consumption of frivolous goods to a larger extent. Furthermore, weak evidence is provided that microcredit can be used as a device to foster self-discipline. We also ensure that our results cannot be explained by intrahousehold conflict issues. The second chapter largely draws on Bonan J, Dagnelie O., LeMay-Boucher P. and Tenikue M. (2012) “Is it all about Money? A Randomized Evaluation of the Impact of Insurance Literacy and Marketing Treatments on the Demand for Health Microinsurance in Senegal”, Working Papers 216, University of Milano-Bicocca, Department of Economics. It is based on a field work we carried out in Spring-Summer 2010 in Thies, Senegal, which I coordinated and supervised. The chapter presents experimental evidence on mutual health organizations (MHOs) in the area of Thiès, Senegal. Despite their benefits, in some areas there remain low take-up rates. We offer an insurance literacy module, communicating the benefits from health microinsurance and the functioning of MHOs, to a randomly selected sample of households. The effects of this training, and three cross-cutting marketing treatments, are evaluated using a randomized control trial. We find that our various marketing treatments have a positive and significant effect on health insurance adoption, increasing take-up by around 35%. Comparatively the insurance literacy module has a negligible impact on the take up decisions. We attempt at providing different contextual reasons for this result. The third chapter is an extension of the second and draws on the same dataset. We measure the willingness to pay (WTP) for MHOs premiums in a Senegalese urban context. WTP valuations can help both policy makers and existent MHOs in better understanding the characteristics of the demand of microinsurance products. This chapter considers the role of individual and household socio-economic determinants of willingness to pay for a health microinsurance product and add to the previous literature evidence of the role of income, wealth and risk preferences on individual WTP. We find that richer, more wealthy and more risk-averse head of households are more likely to reveal a higher WTP for health microinsurance. Conscious of the potential limits of our elicitation strategy (bidding game), we incorporate the existent literature on the effects of ‘preferences anomalies’ (Watson and Ryan 2007) and estimate WTP accounting for structural shift in preferences (Alberini et al. 1997), anchoring effect (Herriges and Shogren 1996) and the two effects together (Whitehead 2002). We find evidence of slight underestimation of the median WTP if preferences anomalies are not taken into consideration. However, the extent of such difference is far from being relevant. Previous results on the determinants of WTP are robust to the effect of such preference anomalies. We also provide an analysis of the predictive power of WTP on the actual take-up of insurance following our offering of membership to a sample of 360 households. WTP appears to have a positive and significant impact on actual take-up.

It is standard practice to assume the discounted utility (DU) model on the part of the economic agents. This thesis tests the key axiom of the DU model (stationarity) in the health domain. Intertemporal preferences for health are of interest because of the debate over the appropriate treatment of future health effects in economic evaluation and of the relationship between intertemporal preferences and health-affecting behaviour. Social intertemporal preferences for fatal changes in health and private and social intertemporal preferences for non-fatal changes were elicited from members of the general public. Private intertemporal preferences for non-fatal changes were elicited from university students. Stationarity was violated in all three studies indicating that the DU model does not accurately describe individuals' intertemporal preferences. Psychologists dissatisfied with the DU model have developed hyperbolic models which replace the stationarity axiom by a generalised stationarity axiom. This thesis compared the descriptive properties of the DU model and hyperbolic discounting models in the health domain. The results showed that the hyperbolic discounting models fitted the data better than the DU model. This indicates that hyperbolic models should be preferred in the analyses of health affecting behaviour. Whether they should also be used in economic evaluations is likely to depend on other criteria as well as descriptive superiority. To inform the debate about the appropriate discount rate for health effects in economic evaluations this thesis investigated whether intertemporal preferences differ across outcomes within the health domain. The results showed that private and social intertemporal preferences for non-fatal changes in health are very similar. More differences were found between intertemporal preferences for fatal changes and non-fatal changes. This indicates that the debate over the relationship between individuals' preferences and the social discount rate is less important and that the debate should perhaps focus more on whether the rate should depend on the type of health outcome of the intervention.

This paper analyses the pricing on spare parts. Empirical studies have showed that manufacturers of durable goods make an unproportional large profit on its spare parts in relation to the revenue it generates. It is first showed that according to the standard economic model the price on spare part ought to be zero since the producer include an insurance in the price of the main good. Further it is showed that moral hazard alone do not explain the pricing found in the studies. Finally an analysis of whether consumers with present-biased preferences could be a possible explanation is made. The analysis finds that it is a possibility however somewhat unlikely.

Diese Dissertation besteht aus drei unabhängigen Artikeln in dem Forschungsfeld der Informationsökonomik. Ein wiederkehrendes Motiv in allen drei Artikeln ist die ambivalente Rolle von privater Information. In Kontrast zur klassischen Entscheidungstheorie, in der mehr Informationen Individuen niemals schlechter stellt, analysiere ich drei verschiedene Umgebungen, in denen mehr Konsumenteninformation die Konsumentenrente verringern kann.
This dissertation comprises three independent chapters in the field of information economics. The recurrent theme of all three chapters is the ambiguous role of information: While in standard decision theory additional information enables individuals to weakly increase utility through making better choices, I analyze three di erent environments in which more information to consumers may actually be detrimental to consumer utility.

Expected utility is introduced. Risk aversion and its equivalence with concavity of the utility function (Jensen’s inequality) are explained. The concepts of relative risk aversion, absolute risk aversion, and risk tolerance are introduced. Certainty equivalents are defined. Expected utility is shown to imply second‐order risk aversion. Linear risk tolerance (hyperbolic absolute risk aversion), cautiousness parameters, constant relative risk aversion, and constant absolute risk aversion are described. Decreasing absolute risk aversion is shown to imply a preference for positive skewness. Preferences for kurtosis are discussed. Conditional expectations are introduced, and the law of iterated expectations is explained. Risk averse investors are shown to dislike mean‐independent noise.

In the real world many facts appear to conflict with the assum ptions of the standard life-cycle model and its main hypotheses. The mental accounting model challenges the assumption that resources are fungible. Substantial evidence produced by psychology, laboratory experiments, and empirical studies points out that people do not make time-consistent decisions, leading to the analysis of time-inconsistent preferences and hyperbolic discounting, a model in which rational agents make time-inconsistent decisions. A third critique is that people are in fact not fully informed about financial opportunities (the equity premium, say, or the virtue of diversification). In this chapter we review the literature on financial sophistication. A final departure from the standard approach explicitly models another important fact of life, namely, that our own choices are affected by the choices of other consumers, owing to social preferences.

This chapter introduces the reader to future discounting and some received wisdom. The received wisdom about rational planning tends to assume that it is irrational to have near‐biased preferences (i.e., preferences for lesser goods now compared to greater goods further in the future).Thechapter describes these preferences by introducing the reader to value functions. Value functions are then used to model different kinds of distant future temporal discounting (e.g., hyperbolic, exponential, absolute). Finally, the chapter makes a distinction between temporal discounting and risk discounting. It offers a reverse lottery test to tease apart these two kinds of discounting.

Inter-temporal choices have been an important aspect of Behavioral Economics, as they deal with time-dependent decision-making of people in various situations. This chapter discusses hyperbolic time-discounting, which has gained significant recognition and has become an important part of public-policy and economic studies in last few years. It also highlights the importance of this concept from a real-life perspective, by showing its relevance in credit-behavior of individuals. This is shown by highlighting the unstable preferences of individuals using credit-cards, which exploit time-inconsistent behavior. Despite the paucity of current research, understanding impulsive-behavior has gained popularity recently because of the relevance of wellbeing and happiness in the global scenario. As is evident, credit debt does hamper people's quality of life, and so it becomes important for researchers and policymakers to reduce impulsivity and self-control issues, by making consumers use costly commitment-devices and other behavioral options to help them make rational and justified choices.