Discounting and Impatience

Abstract: Understanding how people actually trade off time for money is perhaps the major question in the field of time discounting. There is indeed a vast body of work devoted to explore the underlying mechanisms of the individual decision making process in an intertemporal context. This paper presents a family of new discount functions whereof we derive a formal axiomatization. Applying the framework proposed by Bleichrodt, Rohde and Wakker, we further extend their formulation of CADI and CRDI functions, making discounting a function not only of time delay but, simultaneously, also of time distortion. Our main purpose is, in practice, to provide a tractable setting within which individual intertemporal preferences can be outlined. Furthermore, we apply our models to study the relation between individual time preferences and personality traits. For the CADI-CADI, results show that the habit of smoking is heavily related with both impatience and time perception. Within the Big-Five framework, conscientiousness, agreeableness and openness are positively related with patience (low r, initial discount rate).