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Consumption and Risk with hyperbolic discounting

  • Gong, Liutang
  • Smith, William
  • Zou, Heng-fu

Hyperbolic discounting is not observationally equivalent to exponential discounting. It is always possible to calibrate an exponential model so that it predicts the same level of consumption as a hyperbolic model. However, the two models have radically different comparative statics.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4NK46WH-7/2/223138ce163c8df8cd9571190be2292d
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 96 (2007)
Issue (Month): 2 (August)
Pages: 153-160

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Handle: RePEc:eee:ecolet:v:96:y:2007:i:2:p:153-160
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Robert J. Barro, 1999. "Ramsey Meets Laibson In The Neoclassical Growth Model," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1125-1152, November.
  3. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  4. Per Krusell & Anthony A. Smith, Jr., 2003. "Consumption--Savings Decisions with Quasi--Geometric Discounting," Econometrica, Econometric Society, vol. 71(1), pages 365-375, January.
  5. Erzo G. J. Luttmer & Thomas Mariotti, 2003. "Subjective Discounting in an Exchange Economy," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 959-989, October.
  6. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
  7. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-57, July.
  8. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
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