A Logical Economist's Argument Against Hyperbolic Discounting


Although there is a large and growing literature in psychology and economics that uses experimental evidence to support the hyperbolic discounting hypothesis, this note is the first to address the question "Can we detect hyperbolic discounting by offering choices between various monetary amounts at various dates in the future to people who also participate in markets?" If the answer is "yes," I show that the marketplace will exploit hyperbolic discounters to the point where their wealth is zero. If the answer is "no", then the interpretations of various monetary experimental results by psychologists and some economists are illogical.

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© copyright 1996 by Casey B. Mulligan.