Title: Influencing decision making through discounting functions

Authors: Suprava Devi; Mitali Madhusmita Nayak; Srikanta Patnaik

Addresses: Department of Computer Science, FET, Institute of Technical Education and Research (ITER), Siksha 'O' Anusandhan (Deemed to be University), Bhubaneswar, Odisha, India ' Department of Mathematics, FET, Institute of Technical Education and Research (ITER), Siksha 'O' Anusandhan (Deemed to be University), Bhubaneswar, Odisha, India ' Department of Computer Science, FET, Institute of Technical Education and Research (ITER), Siksha 'O' Anusandhan (Deemed to be University), Bhubaneswar, Odisha, India

Abstract: Majority of decisions constitutes a sequence of payoffs over a certain period, for which the decision makers construct the necessary tradeoffs among the current and future payoffs, rather than concerning typical discounting model. The paper discusses about the basic discounting models and their behaviours, greater discount rates for lesser outcomes in comparison with bigger outcomes and for benefits in contrast to losses. The work of the paper shows how to manage uncertainty by manipulating the requirement of hyperbolic discounting individuals for cooperation. The higher payoffs are preferred by the exponentially discounted individuals while the hyperbolically discounted individuals prefer the harder or restrictive one. The article also evaluates the different types of discounting models and then applies the model of hyperbolic discounting to the cooperation problem of Ainslie's prediction to the game of iterated prisoner's dilemma to outlines the given model of IPD and the conflicting point. We reveal that the delay payoffs are eminent for smaller weights which show that it will be better for the rational actor preferred to choose cooperate because they have inclination towards high discount for the near future.

Keywords: discounted utility; exponential discounting; hyperbolic discounting; quasi-hyperbolic discounting; iterated prisoner's dilemma; IPD; intertemporal choice.

DOI: 10.1504/IJMDM.2021.114459

International Journal of Management and Decision Making, 2021 Vol.20 No.2, pp.163 - 181

Received: 19 Mar 2020
Accepted: 24 Jul 2020

Published online: 03 Feb 2021 *

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