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The Effect of a Constant or a Declining Discount Rate on Optimal Investment Timing

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Author Info
Gonzalo Edwards () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

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Abstract

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

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Publisher Info
Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 227.

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Date of creation: 2002
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Publication status: Published as "The Effect of a Constant or a Declining Discount Rate on Optimal Investment Timing", Journal of Applied Economics Letters, Volume 10, Number 10, 2003.
Handle: RePEc:ioe:doctra:227

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Related research
Keywords: Declining discounting; exponential discounting; hyperbolic discounting; investment timing; project evaluation.;

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Find related papers by JEL classification:
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Martin L. Weitzman, 2001. "Gamma Discounting," American Economic Review, American Economic Association, vol. 91(1), pages 260-271, March. [Downloadable!] (restricted)
    Other versions:
  2. Pizer, William & Newell, Richard, 2000. "Discounting the Distant Future: How Much Do Uncertain Rates Increase Valuations?," Discussion Papers dp-00-45, Resources For the Future. [Downloadable!]
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  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. Cropper, Maureen & Laibson, David, 1998. "The implications of hyperbolic discounting for project evaluation," Policy Research Working Paper Series 1943, The World Bank. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Joseph G. Eisenhauer & Luigi Ventura, 2006. "The prevalence of hyperbolic discounting: some European evidence," Applied Economics, Taylor and Francis Journals, vol. 38(11), pages 1223-1234, June. [Downloadable!] (restricted)
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