The Wages of Waiting and Simple Models of Delay Discounting

This paper has four objectives. First, we describe and evaluate three models of delay discounting (time preference), showing how they relate to each other and to already established concepts in accounting/finance and elsewhere. The models are: exponential (E), hyperbolic (H), and arithmetic (A), a simple difference model. Second, we perform a small meta-study of past research in binary intertemporal choice, to evaluate the models against published data. Third, we conduct three new studies of our own to test the models' goodness-of-fit to individual discounting behavior. Fourth, we establish the robustness of our conclusions to modeling the subjective perception of time and money using Stevens-like power laws. The clear winner is A, both in the meta-study and in our own new data; with re-specifications of time and money; across distinct cohorts of participants; and with stimuli that generate different correlational relationships between the models. To protect our conclusions against artifactual dependence on unnecessary assumptions, we use only standard nonparametric statistics to measure goodness-of-fit of the models to individual data, and to test those fits using inferential statistics