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Some Common Confusions about Hyperbolic Discounting

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  • Eric Rasmusen

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

There is much confusion over what "hyperbolic discounting" means. I argue that what matters is the use of relativistic instead of objective time, not the shape of the discount function.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2008-11-rasmusen.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2008-11.

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Date of creation: Mar 2008
Date of revision:
Handle: RePEc:iuk:wpaper:2008-11

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Related research

Keywords: time inconsistency; hyperbolic discounting;

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References

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  1. Douglas Bernheim & Antonio Rangel, 2007. "Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics," Discussion Papers 07-031, Stanford Institute for Economic Policy Research.
  2. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  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. Charles M. Harvey, 1986. "Value Functions for Infinite-Period Planning," Management Science, INFORMS, vol. 32(9), pages 1123-1139, September.
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Cited by:
  1. Caputo, Michael R., 2013. "The intrinsic comparative dynamics of infinite horizon optimal control problems with a time-varying discount rate and time-distance discounting," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 810-820.
  2. Eric Crampton & Matt Burgess & Brad Taylor, 2011. "The Cost of Cost Studies," Working Papers in Economics 11/29, University of Canterbury, Department of Economics and Finance.
  3. Eric Rasmusen, 2012. "Internalities and paternalism: applying the compensation criterion to multiple selves across time," Social Choice and Welfare, Springer, vol. 38(4), pages 601-615, April.
  4. Gahramanov, Emin, 2013. "Survival misperception, time inconsistency, and implications for life-cycle saving and welfare," Economic Modelling, Elsevier, vol. 32(C), pages 539-550.

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