IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Hyperbolic Discounting and Economic Policy

Listed author(s):
  • Nagy Benedek

    (University of Szeged, Hungary, 6722 Szeged, Kálvária Av. 1)

Registered author(s):

    Economic policy-making often entails comparison between immediate costs and flows of future benefits or immediate benefits and series of future costs. Economics has a tool to handle such comparisons: the present- and future value calculations and the net present value rule. Experimental economics, however, has strongly criticised the method of exponential discounting applied in such calculations. Based on experiments for the sake of more psychological realism, they propose alternative methods to the exponential model: hyperbolic and quasi-hyperbolic discounting models.The present paper has a twofold objective: first, to review these different models and the relationships between them to show how the different models will yield different results when calculating and comparing present values of a single future payment, but even more if we compare present values of flows of future payments. The literature has not yet employed the hyperbolic and quasi-hyperbolic models for such calculations. Second, I point out why it is important to heed the findings of experimental economics especially in the field of economic policy-making.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: https://www.degruyter.com/view/j/revecp.2010.10.issue-3/v10135-009-0010-7/v10135-009-0010-7.xml?format=INT
    Download Restriction: no

    Article provided by De Gruyter Open in its journal Review of Economic Perspectives.

    Volume (Year): 10 (2010)
    Issue (Month): 3 (January)
    Pages: 71-86

    as
    in new window

    Handle: RePEc:vrs:reoecp:v:10:y:2010:i:3:p:71-86:n:1
    Contact details of provider: Web page: http://www.degruyteropen.com

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:vrs:reoecp:v:10:y:2010:i:3:p:71-86:n:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.