Comments on: Hyperbolic Discounting http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/ Geometry, Topology, Categories, Groups, Physics, . . . Everything Sat, 19 Jul 2008 10:21:04 +0000 http://wordpress.org/?v=MU By: Andrew Muller http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2873 Andrew Muller Tue, 04 Mar 2008 00:35:54 +0000 http://cornellmath.wordpress.com/?p=238#comment-2873 If someone was interested into continuing to study this, they might consider replacing monetary value with something of constant worth, like snacks. Greg, for example, might consider five jelly beans now substantially more important then six jelly beans tomorrow if not just for the fact that a single jelly bean would fail to make a detectable difference in the levels of enjoyment. However, were I to offer him ten jelly beans any amount of time down the line in place of his immediate five, he would be more likely to scratch his chin and consider where he will be at that point in the future (for studies have shown his love of jelly beans does not diminish over time). If the above is true, then I believe the initial base of gratification has a much larger role in people's thought process, and the time frame has less to do with the equation than what multiples of the original offered (if that makes any sense). To relate to the above example, were I to offer Greg three jelly beans today or four tomorrow, the value of the single jelly bean in question is greater as it represents a larger portion of the immediate offer. Likewise, were I to offer three beans now, or nine after a wait, the amount of time he would wait is not even relative as three times as many jelly beans is worth any wait. Maybe I'll conduct some research at my dorm with candies. If someone was interested into continuing to study this, they might consider replacing monetary value with something of constant worth, like snacks. Greg, for example, might consider five jelly beans now substantially more important then six jelly beans tomorrow if not just for the fact that a single jelly bean would fail to make a detectable difference in the levels of enjoyment. However, were I to offer him ten jelly beans any amount of time down the line in place of his immediate five, he would be more likely to scratch his chin and consider where he will be at that point in the future (for studies have shown his love of jelly beans does not diminish over time).
If the above is true, then I believe the initial base of gratification has a much larger role in people’s thought process, and the time frame has less to do with the equation than what multiples of the original offered (if that makes any sense). To relate to the above example, were I to offer Greg three jelly beans today or four tomorrow, the value of the single jelly bean in question is greater as it represents a larger portion of the immediate offer. Likewise, were I to offer three beans now, or nine after a wait, the amount of time he would wait is not even relative as three times as many jelly beans is worth any wait.
Maybe I’ll conduct some research at my dorm with candies.

]]> By: Greg Muller http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2851 Greg Muller Tue, 26 Feb 2008 21:13:18 +0000 http://cornellmath.wordpress.com/?p=238#comment-2851 Argh, I hate hidden rebates. Though, I think this is a function of my difficulty in executing basic tasks, like filling out a form, mailing a letter and depositing a check, rather than discounting the future payoff. Argh, I hate hidden rebates. Though, I think this is a function of my difficulty in executing basic tasks, like filling out a form, mailing a letter and depositing a check, rather than discounting the future payoff.

]]> By: Nate Berkowitz http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2850 Nate Berkowitz Tue, 26 Feb 2008 20:32:23 +0000 http://cornellmath.wordpress.com/?p=238#comment-2850 Here's a a good scam (if you own a store): advertise some product at an after-rebate price. Assume some percentage of people will make a purchase based on that price that they wouldn't have made otherwise. When those customers realize that they won't actually get the rebate for 6 to 8 weeks, the value of the rebate will shrink. Probably for many people it will drop below the minimum value threshold required to make filling out a form and walking to the mailbox worth their time. the "No Payments For 90 Days!" trick is similar, but it relies on cost discounting over time. I don't know whether that's also hyperbolic. of course describing your prices as "So low, manufacturers have hired men to kill us!!!" could also be described as hyperbolic discounting, but that's something different... Here’s a a good scam (if you own a store): advertise some product at an after-rebate price. Assume some percentage of people will make a purchase based on that price that they wouldn’t have made otherwise.

When those customers realize that they won’t actually get the rebate for 6 to 8 weeks, the value of the rebate will shrink. Probably for many people it will drop below the minimum value threshold required to make filling out a form and walking to the mailbox worth their time.

the “No Payments For 90 Days!” trick is similar, but it relies on cost discounting over time. I don’t know whether that’s also hyperbolic.

of course describing your prices as “So low, manufacturers have hired men to kill us!!!” could also be described as hyperbolic discounting, but that’s something different…

]]> By: Greg Muller http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2849 Greg Muller Tue, 26 Feb 2008 15:37:35 +0000 http://cornellmath.wordpress.com/?p=238#comment-2849 Yeah, I think this is gonna be too much work to make money off of; all the ways of capitalizing on immediate gratification are pretty well-exploited, and all the long term ways of swindling people take too long. The $latex e^x$ versus $latex 10x^2$ thing was actually on my GRE math subject test (or maybe a practice test I took? its hard to remember), with a picture kindly provided. It would seem that I have a fondness for ways of tricking people mathematically, since I remembered it from then. Yeah, I think this is gonna be too much work to make money off of; all the ways of capitalizing on immediate gratification are pretty well-exploited, and all the long term ways of swindling people take too long.

The e^x versus 10x^2 thing was actually on my GRE math subject test (or maybe a practice test I took? its hard to remember), with a picture kindly provided. It would seem that I have a fondness for ways of tricking people mathematically, since I remembered it from then.

]]> By: Peter Luthy http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2843 Peter Luthy Tue, 26 Feb 2008 05:09:33 +0000 http://cornellmath.wordpress.com/?p=238#comment-2843 That is pretty funny, Greg. You'd think anyone who took 2 years of high school algebra would immediately correlate changes in money with exponential growth/decay just like interest or inflation since that the exponential function is hammered into their brains for weeks while they do interest computations. Then again I've seen enough scratch tickets in convenience stores to realize typical people aren't doing any computations when dealing with money. That is pretty funny, Greg. You’d think anyone who took 2 years of high school algebra would immediately correlate changes in money with exponential growth/decay just like interest or inflation since that the exponential function is hammered into their brains for weeks while they do interest computations. Then again I’ve seen enough scratch tickets in convenience stores to realize typical people aren’t doing any computations when dealing with money.

]]> By: Ben Webster http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2841 Ben Webster Tue, 26 Feb 2008 00:11:39 +0000 http://cornellmath.wordpress.com/?p=238#comment-2841 <i>Now, I just need to figure out how to use this to swindle people…</i> That's easy; start a credit card company. Now, I just need to figure out how to use this to swindle people…

That’s easy; start a credit card company.

]]> By: John Armstrong http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2840 John Armstrong Mon, 25 Feb 2008 22:17:09 +0000 http://cornellmath.wordpress.com/?p=238#comment-2840 Isabel: I'm pretty sure the "with a graphing calculator" comes into it. That is, they plug them into the calculator, see the exponential cut across through the parabola -- crossing twice -- and never stop to think that the exponential eventually rises faster than the quadratic -- thus crossing again, far above the part of the graph near the origin. Isabel: I’m pretty sure the “with a graphing calculator” comes into it. That is, they plug them into the calculator, see the exponential cut across through the parabola — crossing twice — and never stop to think that the exponential eventually rises faster than the quadratic — thus crossing again, far above the part of the graph near the origin.

]]> By: Isabel Lugo http://cornellmath.wordpress.com/2008/02/25/hyperbolic-discounting/#comment-2839 Isabel Lugo Mon, 25 Feb 2008 20:55:13 +0000 http://cornellmath.wordpress.com/?p=238#comment-2839 You could definitely use it to swindle people somehow -- the problem is that it'll take a long time to make money with such a scheme, because you're taking advantage of the skewed way in which people see <i>long</i> times. So this is not a get-rich-quick scheme. And what do undergrads say about e^x and 10x^2, anyway? I've never asked. You could definitely use it to swindle people somehow — the problem is that it’ll take a long time to make money with such a scheme, because you’re taking advantage of the skewed way in which people see long times. So this is not a get-rich-quick scheme.

And what do undergrads say about e^x and 10x^2, anyway? I’ve never asked.

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