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.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.