Decision Sciences Seminar
Wednesday January 22, 2014
11:15AM - 12:30PM
Manel Baucells Universitat Pompeu Fabra
Satiation Preferences: theory, neurobiological justification, and data from social media
The predominant model of inter-temporal preferences, discounted utility, suffers from a major inadequacy: it does not possess the local substitution property (consumption in nearby dates should be close substitutes). The literature has proposed one alternative, the durability model, that lacks economic appeal. We propose a second alternative, the satiation model. We characterize the satiation model in terms of five intuitive properties, and explore its implications. Optimal consumptions plans for the standard capital allocation problem involves a mixture of discrete and continuous consumption and is generally U-shaped (e.g., an initial gulp, followed by a steady flow of consumption, and a final gulp). We complement the theory with a neuro-biological-like system that justifies satiation preferences. Finally, we present data from social media on sequences constructed and consumed in the real world that fit the U-shaped pattern predicted by satiation preferences.