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Intertemporal Choice: Delay Discounting

This lecture explores the concept of intertemporal choice and delay discounting, where the value of a reinforcer diminishes with the delay in receiving it. It discusses the subjective value of rewards, discounting rates, estimating subjective value curves, indifference points, and the irrationality of hyperbolic discounting. It also examines parallels between economics and operant behavior, including demand curves and elasticity of demand.

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Intertemporal Choice: Delay Discounting

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  1. PSYC 3510 – Lecture 12

  2. Intertemporal choice Delay discounting: The idea that the value of a reinforcer declines with the amount of time by which it is delayed. Would you rather have $10 now or $25 in 4 days?

  3. Intertemporal choice Most people (and animals) are hyperbolic discounters V

  4. Intertemporal choice Most people (and animals) are hyperbolic discounters V Reward magnitude Delay Subjective value of reward Discounting rate parameter (different for each person)

  5. Intertemporal choice Most people (and animals) are hyperbolic discounters V Reward magnitude Delay Subjective value of reward Discounting rate parameter (different for each person)

  6. Intertemporal choice Most people (and animals) are hyperbolic discounters V Reward magnitude Delay Subjective value of reward Discounting rate parameter (different for each person) What is meant by ‘subjective value’?

  7. Intertemporal choice Activity Take out a sheet of paper

  8. Intertemporal choice How does one estimate the subjective value curve? JH YH CH Kable, J. W., & Glimcher, P. W. (2007). The neural correlates of subjective value during intertemporal choice. Nature Neuroscience, 10(12), 1625–33.

  9. Intertemporal choice How does one estimate the subjective value curve? JH YH CH Kable, J. W., & Glimcher, P. W. (2007). The neural correlates of subjective value during intertemporal choice. Nature Neuroscience, 10(12), 1625–33.

  10. Intertemporal choice Find indifference points. When repeatedly offered a choice between $20 now of $40 in 90 days, subject JH chooses the delayed option 50% of the time. This means he/she is indifferent—they could go either way. More formally, for JH $20 now is identical to $40 in 90 days.

  11. Intertemporal choice Find indifference points. When repeatedly offered a choice between $20 now of $40 in 90 days, subject JH chooses the delayed option 50% of the time. This means he/she is indifferent—they could go either way. More formally, for JH $20 now is identical to $40 in 90 days.

  12. Intertemporal choice Find indifference points. When repeatedly offered a choice between $20 now of $40 in 90 days, subject JH chooses the delayed option 50% of the time. This means he/she is indifferent—they could go either way. More formally, for JH $20 now is identical to $40 in 90 days. We can thus say that JH’s subjective value of money drops by half (0.5) if it is delayed by 90 days.

  13. Intertemporal choice Kable, J. W., & Glimcher, P. W. (2007). The neural correlates of subjective value during intertemporal choice. Nature Neuroscience, 10(12), 1625–33.

  14. Intertemporal choice Highly recommend!

  15. Intertemporal choice Most people (and animals) are hyperbolic discounters V Discounting, by itself, is not irrational. But hyperbolic discounting is.

  16. Intertemporal choice Most people (and animals) are hyperbolic discounters V Discounting, by itself, is not irrational. But hyperbolic discounting is.

  17. Intertemporal choice Most people (and animals) are hyperbolic discounters V Discounting, by itself, is not irrational. But hyperbolic discounting is. Preferences are not consistent over time!

  18. Behavioral economics Parallels between economics and operant behavior Schedule of reinforcement = price Response = spending Reinforcement = commodity *The goal of studying operant learning is to identify how responding (spending) is influenced by a schedule’s contingencies (prices).

  19. Behavioral economics Demand Curve Elasticity of demand: The degree to which price influences purchasing.

  20. Behavioral economics Demand Curve Highly inelastic (e.g. cigarettes) Elasticity of demand: The degree to which price influences purchasing. Highly elastic (e.g. candy)

  21. Behavioral economics Demand Curve FIGURE 7.10 Demand curves for cigarettes (solid circles) and money (open circles) with progressively larger fixed-ratio requirements. The number of reinforcers obtained, and the fixed-ratio requirements are both presented on logarithmic scales. (Based on Johnson & Bickel, 2006.)

  22. Behavioral economics Factors that affect elasticity of demand Availability of substitutes Price range Income level

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