Data_Sheet_1_A Mathematical Analysis of the Improving Sequence Effect for Monetary Rewards.zip (4.27 kB)

Data_Sheet_1_A Mathematical Analysis of the Improving Sequence Effect for Monetary Rewards.zip

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posted on 29.11.2018 by Salvador Cruz Rambaud, María José Muñoz Torrecillas, Adriana Garcia

In this paper, we mathematically formalize the concept of improving sequence effect, which is one of the main anomalies of the discounted utility model [1]. The improving sequence effect implies a preference for a given sequence of outcomes, which increase over time, and has been empirically demonstrated for both monetary and nonmonetary results (hedonic experiences and health-related outputs). Nevertheless, to date, there is no mathematical treatment of this anomaly in the context of intertemporal choice, which allows us to relate this paradox to other anomalies, such as the delay and magnitude effects. In this way, the present manuscript has filled this gap. More specifically, we have proved that the improving sequence effect for monetary rewards cannot be rationalized by using a separable discount function but only by considering a non-separable discount function. Moreover, under certain conditions, we have proved that the delay and magnitude effects are necessary conditions for the existence of the improving sequence effect.

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