Estimating and decision making for Design projects and Cognitive Bias of Hyperbolic Discounting

摘要

Human beings are conditioned and designed by society to relate high degree of uncertainty to future. Several behavioral studies have demonstrated that the phenomenon of attaching hazard rate to future events is consistent across habits related to food, drugs, exercising, impulsive shopping and saving money. A person, when planning for long term would think about health and monetary benefits arising out of all of these. But when faced with a choice would prefer to procrastinate. There is sufficient evidence for the fact that humans and animals tend to be more impatient when dealing with reward nearer in time than one due further in future. This phenomenon is called as Hyperbolic Discounting. This paper explores the hyperbolic discounting as a cognitive bias. Hyperbolic discounting can be defined as the act of valuing intertemporal choices on a hyperbolic scale. Renowned economist Robert Strotz (1956) conducted empirical studies on agents whose preferences change over time. He found that when faced with a choice between two rewards of different values due at different time, an individual tends to choose one which is due after a shorter time delay even though its value is comparatively lesser than the other one which is due at a later stage. As the time when the rewards are due increases person tends to be more patient in choosing the reward. Loewenstein and Thaler (1989) classify such behavior as 'extremely myopic preferences'.