Journal of Behavioral Economics and Finance
Online ISSN : 2185-3568
Special Issue
Time Discounting: The Concavity of Time Discount Function:
An Experimental Study
Kan Takeuchi
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Volume 5 (2012) Pages 2-9

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  This paper examines the concavity of time discount function. The experiment with 37 subjects provides the evidence in favor of an inverse S-shaped time discount function rather than a hyperbolic (and convex) time discount function. If time discount function is concave around t, then the decision-maker exhibits future bias.
  Future bias has seldom been reported in the literature, since it is not easily identified. Experiments on time preference commonly let subjects compare two (delayed) payment options and adjust the reward level of one option to make the subject be indifferent between the two options. To detect future bias, in this study, I adjust the timing of the payment instead of the reward amount. This new elicitation method is also independent of the confounding factors that are common in the existing experiments. Specifically, the method does not put any assumption on the form of utility function and does not assume that time and reward are separable either. This advantage enables us to estimate time preference more precisely.

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© 2012 Association of Behavioral Economics and Finance
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