Reconsidering the Experimental Evidence for Quasi-Hyperbolic Discounting

Experiments on intertemporal choice have found "preference reversals" and related anomalies. These robust findings have been considered a major source of support for the quasi-hyperbolic discounting model of consumption preference. Our analysis clarifies the relationship between the experimental results and the model. We prove that, like exponential discounters, quasi-hyperbolic discounters are best off when they maximize wealth by choosing the greater financial reward in experiments. When experimental rewards are not financial, the choices of even exponential agents cannot be theoretically restricted because of complementarities, across goods and time, and because of learning that occurs between decisions. Since generalizing preferences from exponential to quasi-hyperbolic is neither necessary nor sufficient to generate the experimental results, there is a fundamental identification problem