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Discounting and divergence of opinion

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Author Info

  • Jouini, Elyès
  • Marin, Jean-Michel
  • Napp, Clotilde

Abstract

Agents impatience rate and their anticipations about the future of the economy, are two essential determinants of the equilibrium discount rate, as illustrated by the Ramsey formula. Heterogeneity in time preference rates and in anticipations is widely acknowledged. Our objective is to determine the equilibrium discount rate when this heterogeneity is taken into account. Among others we tackle the following questions: As an additional risk or uncertainty, can dispersion in agents' characteristics lead to lower discount rates? What is the asymptotic behavior of the discount rate in such a setting? More generally, what is the shape of the yield curve?

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 2 (March)
Pages: 830-859

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:830-859

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Discounting Yield curve Divergence of opinion Gamma discounting Costs and benefits analysis Ramsey formula Discount rate;

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References

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Citations

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Cited by:
  1. Jaksa Cvitanic & Elyès Jouini & Semyon Malamud & Clotilde Napp, 2011. "Financial Markets Equilibrium with Heterogeneous Agents," Review of Finance, European Finance Association, vol. 16(1), pages 285-321.
  2. Mark C. Freeman & Ben Groom, 2013. "How certain are we about the certainty-equivalent long term social discount rate?," Grantham Research Institute on Climate Change and the Environment Working Papers 138, Grantham Research Institute on Climate Change and the Environment.
  3. Gollier, Christian, 2014. "Gamma discounters are short-termist," IDEI Working Papers 828, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Elyès Jouini & Clotilde Napp, 2010. "Unbiased Disagreement in Financial Markets, Waves of Pessimism and the Risk-Return Trade-off," Review of Finance, European Finance Association, vol. 15(3), pages 575-601.
  5. Roman Muraviev, 2013. "Market selection with learning and catching up with the Joneses," Finance and Stochastics, Springer, vol. 17(2), pages 273-304, April.
  6. Elyès Jouini & Clotilde Napp, 2009. "Cognitive biases and the representative agent," Working Papers halshs-00488570, HAL.
  7. Geoffrey Heal & Antony Millner, 2013. "Discounting under disagreement," Grantham Research Institute on Climate Change and the Environment Working Papers 112, Grantham Research Institute on Climate Change and the Environment.
  8. Maureen L. Cropper & Mark C. Freeman & Ben Groom & William A. Pizer, 2014. "Declining Discount Rates," American Economic Review, American Economic Association, vol. 104(5), pages 538-43, May.
  9. Jouini, Elyès & Napp, Clotilde, 2014. "How to aggregate experts' discount rates: An equilibrium approach," Economic Modelling, Elsevier, vol. 36(C), pages 235-243.
  10. Gierlinger, Johannes & Gollier, Christian, 2008. "Socially Efficient Discounting under Ambiguity Aversion," IDEI Working Papers 561, Institut d'Économie Industrielle (IDEI), Toulouse.
  11. Elyès Jouini & Clotilde Napp, 2008. "Aggregation of Discount Rates: an Equilibrium Approach," Working Papers halshs-00394035, HAL.
  12. Gollier, Christian, 2014. "Gamma discounters are short-termist," TSE Working Papers 14-499, Toulouse School of Economics (TSE).

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