The Hyperbolic Factor: a Measure of Decreasing Impatience
AbstractMany studies have found that discounting is hyperbolic rather than constant. Hyperbolicdiscounting is becoming increasingly popular in economic applications. Most studies thatprovide evidence in favor of hyperbolic discounting either are merely qualitative or theydepend on assumptions about, or parametric fittings of, utility functions. This paper provides a quantitative measure for the degree of deviation from stationarity that can overcome the problems mentioned. This measure, the hyperbolic factor, can easily be calculated from data and does not require knowledge of the utility function. Moreover, it provides simple preference foundations of the most popular discount functions. Thus, the hyperbolic factor provides an easy tool for theoretical preference foundations, critical empirical tests, and quantitative measurements of hyperbolic discounting.
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Bibliographic InfoPaper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 044.
Date of creation: 2005
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