An Additive-Utility Model of Delay Discounting

Goods remote in temporal, spatial, or social distance, or in likelihood, exert less control over our behavior than those more proximate. The decay of influence with distance, of perennial interest to behavioral economists, has had a renaissance in the study of delay discounting. By developing discount functions from marginal utilities, this article provides a framework that resolves several anomalies of intertemporal choice. Utilities are inferred to be power functions of monetary value, delay, and probability. Utility, not value, is discounted, with decisions made by adding the utility of a good to the disutility of a delay or contingency. The theory reduces to standard treatments, such as exponential, hyperbolic and hyperboloid, and exponential-power; naturally predicts magnitude effects and other asymmetries; is consistent with subadditivity, immediacy, and certainty effects; returns conjointly measured determinations of monetary utility and temporal distance functions; and is extensible to other dimensions of distance.