Intermittent Discounting

Mardi | 2017-05-02
Salle des thèses de 16h00 à 17h20

A multi-period setting is studied in which a consumer incurs intermittent waiting costs until the consumption date. The way future utility is discounted satisfies (i) a preference for early consumption, but only during waiting periods when future consumption is reminded, and (ii) indifference between early and late consumption in non-reminding periods in which people are distracted away from future gratifications. With some additional hypotheses including exponential discounting of waiting costs, I show that the model replicates two important and robust features of intertemporal preferences: (i) decreasing impatience or hyperbolic discounting according to which the rate at which an outcome is discounted over time decreases as the time horizon gets longer and (ii) present bias i.e. the propensity to prefer immediate gratification to future ones. Intermittency of waiting states means that future utility is gradually but not regularly discounted with the passing of time. This slows down the discounting process and makes the consumer decreasingly impatient with the length of the delay.