How confident are we that hyperbolic time discounting is even real? I think you can explain these results with zero time discounting.
Normal Person: hey I have some money I don’t need right now
Completely Legit Businessperson #1: I advise you to invest that. You can invest it in A for 5% annual returns, or if you are willing to have just slightly less liquidity, in B for 10% annual returns.
Normal Person: I guess B.
Completely Legit Businessperson #2: Hey, do I have some investment opportunities for you?
Normal Person: Yes?
Completely Legit Businessperson #2: And so you know you can trust me, the first $100 in the account is free!
Normal Person: Cool.
Completely Legit Businessperson #2: These accounts have an amazingly high return. In just one week our AI trading strategy will double—
This isn’t even necessarily a risk thing, like would be analogous to the claim. If the reward is small, it also raises the question of friction costs. Taking the prize now has no ongoing cost. Taking it at a later date has a sizable upfront cost and a small ongoing cost.
How confident are we that hyperbolic time discounting is even real? I think you can explain these results with zero time discounting.
Normal Person: hey I have some money I don’t need right now
Completely Legit Businessperson #1: I advise you to invest that. You can invest it in A for 5% annual returns, or if you are willing to have just slightly less liquidity, in B for 10% annual returns.
Normal Person: I guess B.
Completely Legit Businessperson #2: Hey, do I have some investment opportunities for you?
Normal Person: Yes?
Completely Legit Businessperson #2: And so you know you can trust me, the first $100 in the account is free!
Normal Person: Cool.
Completely Legit Businessperson #2: These accounts have an amazingly high return. In just one week our AI trading strategy will double—
Normal Person: Yeah no thanks I’ll take the $100.
This isn’t even necessarily a risk thing, like would be analogous to the claim. If the reward is small, it also raises the question of friction costs. Taking the prize now has no ongoing cost. Taking it at a later date has a sizable upfront cost and a small ongoing cost.