Published on:

# Picoeconomics analyzes patterns of consumption behavior

This term, new to me, appeared in a catalogue of books from MIT Press. Here is a definition from George Ainsley’s website.

“Picoeconomics (micro-micro-economics) explores the implications … that people (often) … discount the prospect of future rewards in a curve that is more deeply bowed than a “rational,” exponential curve. Over a range of delays from seconds to decades, there are pairs of alternative rewards such that subjects prefer the smaller, earlier reward over the larger, later alternative when delay to the smaller reward will be short, but prefer the larger, later reward when the smaller alternative will be more delayed, even though the time from the earlier to the later reward stays the same. The curves that fit the observed data best are hyperbolic, that is, show value as inversely proportional to delay.”

Ainslie originally discovered hyperbolic discounting as an aspect of a broader empirical principle, Herrnstein’s matching law. It’s not simply the size of a reward times the inverse of time until the reward – that would be an exponential function.

The tradeoff between gratification and time delay is not as smooth as an exponential curve but is closer to hyperbolic.
As a very broad application of what I have gleaned about picoeconomics, the reward of quickly hiring the firm you know overwhelms the alternative of looking a bit longer and perhaps finding an even better fit.

Any questions?

Posted in:
Published on:
Updated: