Anticipation and Choice Heuristics in the Dynamic Consumption of Pain Relief
Figure 2
Changes in the instantaneous utility function.
A Linear and concave utility functions. B Simulated optimal consumption paths with no discounting under the two forms of utility function. In each case two sample simulated paths are displayed, to illustrate that, with linear utility there is more than one optimal path. Left panel: under linear utility with no discounting or anticipation all paths which consume the entire budget are equally valued. Consumption is therefore chosen at random from a uniform distribution until the budget is expended. Right panel: concave utility motivates spreading consumption over time.