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Ramsey meets Laibson and Itô: Effects of hyperbolic discounting on stochastic growth

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  • Panas, Epaminondas
  • Yannacopoulos, Athanasios N.

Abstract

In this short note we discuss the effects of random or deterministic hyperbolic discounting on growth, using the stochastic Ramsey model with logarithmic utility as an example. A comparison principle is given which allows to compare the optimal paths under different discount functions.

Suggested Citation

  • Panas, Epaminondas & Yannacopoulos, Athanasios N., 2012. "Ramsey meets Laibson and Itô: Effects of hyperbolic discounting on stochastic growth," The Journal of Economic Asymmetries, Elsevier, vol. 9(1), pages 51-65.
    • Handle: RePEc:eee:joecas:v:9:y:2012:i:1:p:51-65
    DOI: 10.1016/j.jeca.2012.01.003
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    References listed on IDEAS

    as
    1. Ainslie, George, 1991. "Derivation of "Rational" Economic Behavior from Hyperbolic Discount Curves," American Economic Review, American Economic Association, vol. 81(2), pages 334-340, May.
    2. Robert C. Merton, 1975. "An Asymptotic Theory of Growth Under Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(3), pages 375-393.
    3. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 573-597.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Phoebe Koundouri & Georgios I. Papayiannis & Athanasios Yannacopoulos, 2022. "Optimal Control Approaches to Sustainability under Uncertainty," DEOS Working Papers 2215, Athens University of Economics and Business.

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    More about this item

    Keywords

    C61; D91; O40; Hyperbolic discounting; Ramsey model;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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