Towards a general model of temporal discounting

Abstract

Psychological models of temporal discounting have now successfully displaced classical economic theory due to the simple fact that many common behavior patterns, such as impulsivity, were unexplainable with classic models. However, the now dominant hyperbolic model of discounting is itself becoming increasingly strained. Numerous factors have arisen that alter discount rates with no means to incorporate the different influences into standard hyperbolic models. Furthermore, disparate literatures are emerging that propose theoretical constructs that are seemingly independent of hyperbolic discounting. We argue that, although hyperbolic discounting provides an eminently useful quantitative measure of discounting, it fails as a descriptive psychological model of the cognitive processes that produce intertemporal preferences. Instead, we propose that recent contributions from cognitive neuroscience indicate a path for developing a general model of time discounting. New data suggest a means by which neuroscience-based theory may both integrate the diverse empirical data on time preferences and merge seemingly disparate theoretical models that impinge on time preferences.

Figure 1.

Brain regions associated with intertemporal choice can be separated into (left) a control and (B) a valuation system.

Figure 2.

(A) Dual system models of discounting closely approximate quasi-hyperbolic models. (B) Moreover, the models can account for the effects of dopamine agonists on discounting (adapted from Pine et al., 2010). (C) Manipulations to the DLPFC also influence discounting, but only for intermediately values of delayed reward (relative difference is percent difference between larger, later rewards relative to smaller, sooner alternatives; adapted from Figner et al., 2010). (D) Our dual system model fits this behavioral effect by changing the relative weight of the valuation and control systems in decision-making.