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The effect of a constant or a declining discount rate on optimal investment timing

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  • Gonzalo Edwards

Abstract

This paper shows that exponential discounting may have an advancing effect on the timing of investment, not captured by sensitivity analysis carried out for the complete range of instantaneous discount rates implicit in declining discounting.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/1350485032000129106&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 10 (2003)
Issue (Month): 10 ()
Pages: 657-659

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Handle: RePEc:taf:apeclt:v:10:y:2003:i:10:p:657-659

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  1. Cropper, Maureen & Laibson, David, 1998. "The implications of hyperbolic discounting for project evaluation," Policy Research Working Paper Series 1943, The World Bank.
  2. Newell, Richard G. & Pizer, William A., 2003. "Discounting the distant future: how much do uncertain rates increase valuations?," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 52-71, July.
  3. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  4. Martin L. Weitzman, 2001. "Gamma Discounting," American Economic Review, American Economic Association, vol. 91(1), pages 260-271, March.
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Cited by:
  1. Joseph Eisenhauer & Luigi Ventura, 2006. "The prevalence of hyperbolic discounting: some European evidence," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1223-1234.
  2. Gonzalo Edwards, 2002. "La Tasa de Descuento en Proyectos de Largo Plazo," Documentos de Trabajo 231, Instituto de Economia. Pontificia Universidad Católica de Chile..

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