Hyperbolic Discounting and its Consequences

ABSTRACT During this cross-cultural research on time preference the credibility of hyperbolic discounting model is examined. This paper is based on the comparison between the exponential discounting model and hyperbolic model and proposal of different modifications to the existing concepts. Different kind of anomalies, which bring up the necessity of the extension of the hyperbolic discounting model, are mentioned. This paper is aimed at exploring the discount model, the process of decision making and the formation of the individuals’ subjective discount rate from the standpoint of behavioral economics by including in the model such psychological factors as cultural and economic environment and risk aversion. These supplements lead to more complex and credible discount model. The term of procrastination is considered as a direct implementation of hyperbolic discounting. Furthermore, the potential drawbacks occurred during the experimental part are highlighted and possible solutions are proposed.