Abstract
Evidence strongly indicates that human decision makers discount the future using a hyperbolic function instead of following an exponential, which has been the long‐standing assumption. We compare the exponential and hyperbolic models in evaluation of a simple research and development project selection problem, finding that the exponential function favors short‐term choices, while the hyperbolic function favors the long‐term. We demonstrate applications of the hyperbolic function, concluding that the traditional exponential—which does not faithfully represent typical human preferences—leads toward myopic decision making when compared to the hyperbolic. Copyright © 2012 John Wiley & Sons, Ltd.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: 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.
