Step 4: measurement of discount factors and discount rates
The discount factors were computed from the cumulative weighting functions in the discounting modelCumulative weighting functions and discount factor equations.Remark: δ, κ, ∝ , r, and p represent parameters governing discounting model.To determine which discount model best described subjects' preferences, this study used these 5 discounting models to fit the cumulative weighting functions. The subject’s indifference values for 5 time points were used to compute the individual parameters for 5 discounting models. The squared error for each model is calculated using the following equation.Then, the individual best-fitting model was selected based on the minimum squared error. Finally, the best-fitting discounting model was the one with the highest proportion of subjects for whom each of the discount models fit best.Discount rates, or the rates at which future consequences are devalued, were estimated using a continuous approximation based on the relationship between the discount factors and the parameter governing the discounting model. Each discounting model yielded the discount rate results. The discount rate results were chosen using the best-fit discounting model.