Related papers: Microfoundations of Discounting
We study the testable implications of models of dynamically inconsistent choices when planned choices are unobservable, and thus only "on path" data is available. First, we discuss the approach in Blow, Browning and Crawford (2021), who…
Discrete-choice models are used in economics, marketing and revenue management to predict customer purchase probabilities, say as a function of prices and other features of the offered assortment. While they have been shown to be…
It is well known that reinforcement learning can be cast as inference in an appropriate probabilistic model. However, this commonly involves introducing a distribution over agent trajectories with probabilities proportional to exponentiated…
A central push in operations models over the last decade has been the incorporation of models of customer choice. Real world implementations of many of these models face the formidable stumbling block of simply identifying the `right' model…
A monopolist offers personalized prices to consumers with unit demand, heterogeneous values, and idiosyncratic costs, who differ in a protected characteristic, such as race or gender. The seller is subject to a non-discrimination…
The design and pricing of services are two of the most important decisions faced by any intermodal transport operator. The key success factor lies in the ability of meeting the needs of the shippers. Therefore, making full use of the…
In mechanism design it is typical to impose incentive compatibility and then derive an optimal mechanism subject to this constraint. By replacing the incentive compatibility requirement with the goal of minimizing expected ex post regret,…
There is a consensus that human and non-human subjects experience temporal distortions in many stages of their perceptual and decision-making systems. Similarly, intertemporal choice research has shown that decision-makers undervalue future…
The role of specific cognitive processes in deviations from constant discounting in intertemporal choice is not well understood. We evaluated decreased impatience in intertemporal choice tasks independent of discounting rate and…
The main goal of this paper is to investigate which normative requirements, or axioms, lead to exponential and quasi-hyperbolic forms of discounting. Exponential discounting has a well-established axiomatic foundation originally developed…
The ability to uncover preferences from choices is fundamental for both positive economics and welfare analysis. Overwhelming evidence shows that choice is stochastic, which has given rise to random utility models as the dominant paradigm…
Many popular policy gradient methods for reinforcement learning follow a biased approximation of the policy gradient known as the discounted approximation. While it has been shown that the discounted approximation of the policy gradient is…
This paper brings together divergent approaches to time inconsistency from macroeconomic policy and behavioural economics. Behavioural discount functions from behavioural microeconomics are embedded into a game-theoretic analysis of…
The key idea of this model is that firms are the result of an evolutionary process. Based on demand and supply considerations the evolutionary model presented here derives explicitly Gibrat's law of proportionate effects as the result of…
We consider a dynamic pricing problem where customer response to the current price is impacted by the customer price expectation, aka reference price. We study a simple and novel reference price mechanism where reference price is the…
For environmental problems such as global warming future costs must be balanced against present costs. This is traditionally done using an exponential function with a constant discount rate, which reduces the present value of future costs.…
Two-sided matching markets have long existed to pair agents in the absence of regulated exchanges. A common example is school choice, where a matching mechanism uses student and school preferences to assign students to schools. In such…
We introduce the logistic model of consumption growth, which captures a negative feedback loop preventing an unlimited growth of consumption due to finite biophysical resources of our planet. This simple dynamic model allows for derivation…
Classical finance models are based on the premise that investors act rationally and utilize all available information when making portfolio decisions. However, these models often fail to capture the anomalies observed in intertemporal…
We introduce an Attention Overload Model that captures the idea that alternatives compete for the decision maker's attention, and hence the attention that each alternative receives decreases as the choice problem becomes larger. Using this…