Document Type

Article

Publication Date

2015

Abstract

Several studies have shown that people greatly discount future benefits and costs, but few have examined how discounting is manifested in strategic settings. This paper investigates the degree to which the timing of payments affects behavior in four commonly studied strategic settings: a Prisoners’ Dilemma, a Stag-Hunt Game, a First Price Auction, and a Second Price Auction. In general, a two week delay in the date of payment has a comparable effect on outcomes as a substantial reduction in current payoffs. A follow-up study compares individual’s own discount rates with their beliefs of others’ discount rates and finds that people generally think they are more patient than others. This belief can drive behavior in strategic settings: we find clear evidence for this in the Stag-Hunt Game.

Comments

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Behavioral and Experimental Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Behavioral and Experimental Economics, volume 54, in 2015. DOI: 10.1016/j.socec.2014.12.004

The Creative Commons license below applies only to this version of the article.

Peer Reviewed

1

Copyright

Elsevier

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