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“Economics and Psychology”? The Case of Hyperbolic Discounting*
Author(s) -
Rubinstein Ariel
Publication year - 2003
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00106
Subject(s) - hyperbolic discounting , discounting , mathematical economics , economics , focus (optics) , similarity (geometry) , positive economics , dynamic inconsistency , econometrics , psychology , computer science , artificial intelligence , physics , finance , optics , image (mathematics)
The article questions the methodology of “economics and psychology” in its focus on the case of hyperbolic discounting. Using some experimental results, I argue that the same type of evidence, which rejects the standard constant discount utility functions, can just as easily reject hyperbolic discounting as well. Furthermore, a decision‐making procedure based on similarity relations better explains the observations and is more intuitive. The article concludes that combining “economics and psychology” requires opening the black box of decision makers instead of modifying functional forms.