Subjective Hazard Rates Rationalize “Irrational” Temporal Preferences

Christian LuhmannStony Brook University
Michael BixterStony Brook University

Abstract

Delay discounting refers to decision makers’ tendency to treat immediately consumable goods as more valuable than those only available after some delay. Previous work has focused on a seemingly irrational feature of these preferences: the systematic tendency to exhibit more patience when consequences are far in the future but less patience about those same, identical rewards as time passes. One explanation for delay discounting itself appeals to the risk implicitly associated with delayed rewards. The current study investigates whether the implicit risk hypothesis is capable of explaining the seemingly irrational shifts in patience by having participants make subjective risk judgments regarding a variety of real-world scenarios. To reduce the possibility of task demands, participants judged hazard rates rather than survival rates. Results suggest that the seemingly irrational shifts in patience are quite reasonable once participants’ beliefs about the relationship between delay and risk are taken into account.

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