Probability Weighting Function Derived from Hyperbolic Time Discounting: Psychometric Model and Axiomatic System

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A probability weighting function (w(p)) is considered to be nonlinear function of objective probability (p). The present study proposed a probability weighting function derived from hyperbolic time discounting model assuming geometric distribution. Moreover, probability weighting function is derived from Lowenstein and Prelec's (1992) generalized hyperbolic time discounting model. The latter model is same as hyperbolic-logarithmic weighting function considered by Prelec (1998) and Luce (2001).The present study derives this model from the generalized hyperbolic time discounting model assuming Fechner's psychophysical law of time and geometric distribution of trial, and then examines an axiomatic system of the generalized hyperbolic model.

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