1Discounted Utility (DU) Model
means that future utility must be converted to
present value of utility, which requires discounting if we
are impatient
2Time perference
-Impatient
-Hazard Rate
-Uncertainity about the future is greater than
uncertainty about the present
3utility discount rate
rate at which we convert future
value into present value
4The relationship between the discount factor and the discount rate is
δ= 1/1+r
-r is the utility discount rate
5Impulsivity
I prefer to delay gratification when it is distant, but I prefer not to delay gratification when it is imminent
6Procrastination
I prefer to get some unpleasant task over with when it is distant, but I prefer to avoid doing it when it is imminent.
7Hyperbolic discounting
The discount rate changes at different times, typically decreasing over time
8quasi-hyperbolic discounting (also called Beta-delta discounting)
Unlike the DU model, there is another term (β) that discounts all delayed outcomes
9immediacy bias
where I show a strong preference for immediate utility relative to almost immediate utility
10Magnitude effect
where small outcomes are discounted more than large ones
11preference for spreads
they prefer to have good outcomes spread out over time
12duration neglect
length of any profile is not given as much weight as the DU model would predict.