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New discounting functions

Author

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  • Blavatskyy, Pavlo R.

Abstract

Discounting functions weight utilities of outcomes received in different moments of time. A classic exponential (hyperbolic) discounting function is derived from absolute (relative) time stationarity—preferences do not change if time delays are increased/decreased by the same amount (percentage). When decision makers are sensitive to outcomes received in the near future and relatively less sensitive to outcomes received in a far-away future, it may be appropriate to transform our usual chronological time (running from zero to infinity) into a normalized time (between zero and one). New discounting functions are derived by imposing absolute and relative stationarity on such normalized time.

Suggested Citation

  • Blavatskyy, Pavlo R., 2024. "New discounting functions," Economics Letters, Elsevier, vol. 235(C).
    • Handle: RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000430
    DOI: 10.1016/j.econlet.2024.111559
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    More about this item

    Keywords

    Intertemporal choice; Time preference; Discounted utility; Exponential discounting; Hyperbolic discounting;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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