Discounting over subjective time: Subjective time perception helps explain multiple discounted utility anomalies

Abstract

Consumers often face choices involving intertemporal tradeoffs. Existing research suggests that, in general, decision makers do not obey discounted utility theory because their discount rates are context dependent. Recent literature incorporates decision makers' subjective perception of time into the classic discounted utility model and finds relatively constant discount rates over subjective time. In the current study, we investigated the magnitude effect with subjective time, provided a holistic view via a more comprehensive experiment including multiple anomalies, and found that subjective time perception was able to explain most of the anomalies simultaneously in a single scenario.