Related papers: Microfoundations of Discounting
Good economic mechanisms depend on the preferences of participants in the mechanism. For example, the revenue-optimal auction for selling an item is parameterized by a reserve price, and the appropriate reserve price depends on how much the…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
We characterize decreasing impatience, a common behavioral phenomenon in intertemporal choice. Discount factors that display decreasing impatience are characterized through a convexit y axiom for investments at fixed interest rates. Then we…
Empirical research often cites observed choice responses to variation that shifts expected discounted future utilities, but not current utilities, as an intuitive source of information on time preferences. We study the identification of…
This paper investigates how the discount factor and payoff functions can be identified in stationary infinite-horizon dynamic discrete choice models. In single-agent models, we show that common nonparametric assumptions on per-period…
The appropriate discount rate for evaluating policies is a critical consideration in economic decision-making. This paper presents a new model for calculating the derived discount rate for a society that includes different groups with…
Kinetic exchange models have been successful in explaining the shape of the income/wealth distribution in the economies. However, such models usually make some ad-hoc assumptions when it comes to determining the savings factor. Here, we…
Reinforcement learning has traditionally been studied with exponential discounting or the average reward setup, mainly due to their mathematical tractability. However, such frameworks fall short of accurately capturing human behavior, which…
We study identification of dynamic discrete choice models with hyperbolic discounting. We show that the standard discount factor, present bias factor, and instantaneous utility functions for the sophisticated agent are point-identified from…
In this paper, we consider the revealed preferences problem from a learning perspective. Every day, a price vector and a budget is drawn from an unknown distribution, and a rational agent buys his most preferred bundle according to some…
A family of models of individual discrete choice are constructed by means of statistical averaging of choices made by a subject in a reinforcement learning process, where the subject has short, k-term memory span. The choice probabilities…
Time-inconsistent preferences, where agents favor smaller-sooner over larger-later rewards, are a key feature of human and animal decision-making. Quasi-Hyperbolic (QH) discounting provides a simple yet powerful model for this behavior, but…
Existing mathematical models of delay discounting (e. g. exponential model, hyperbolic model, and those derived from nonextensive statistics) consider impulsivity as a single entity. However, the present article derives a novel mathematical…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
We consider the problem of learning from revealed preferences in an online setting. In our framework, each period a consumer buys an optimal bundle of goods from a merchant according to her (linear) utility function and current prices,…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
Choice modeling has been a central topic in the study of individual preference or utility across many fields including economics, marketing, operations research, and psychology. While the vast majority of the literature on choice models has…
Value [4][5] is typically modeled using a continuous representation (i.e., a Real number). A discrete representation of value has recently been postulated [6]. A quantized representation of probability in the brain was also posited and…
In economics and psychology, delay discounting is often used to characterize how individuals choose between a smaller immediate reward and a larger delayed reward. People with higher delay discounting rate (DDR) often choose smaller but…
We develop a structural econometric model to capture the decision dynamics of human evaluators on an online micro-lending platform, and estimate the model parameters using a real-world dataset. We find two types of biases in gender,…