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Discounting and Divergence of Opinion

  • Elyès Jouini

    ()

    (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX)

  • Jean-Michel Marin

    (INRIA Futurs - SELECT - INRIA - Université Paris Sud - Paris XI, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

  • Clotilde Napp

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)

The objective of this paper is to adopt a general equilibrium model and determine the socially efficient discount factor, risk free rate and discount rate when there are heterogeneous anticipations about the growth of the economy as well as heterogeneous time preference rates. Among others we tackle the following questions. Is the socially efficient discount factor an arithmetic average of the individual subjectively anticipated discount factors? More generally, can the Arrow-Debreu prices, the risk free rates, the subjectively expected socially efficient discount factors and discount rates be obtained as an average of the individual subjectively anticipated ones? Can beliefs dispersion be analyzed as a sort of additional risk or uncertainty leading to possibly lower discount rates? Is it socially efficient, when diversity of opinion is taken into account, to reduce the discount rate per year for more distant horizons? If so, what is the trajectory of the decline?

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Paper provided by HAL in its series Post-Print with number halshs-00176636.

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Date of creation: Mar 2010
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Publication status: Published, Journal of Economic Theory, 2010, 145, 830-859
Handle: RePEc:hal:journl:halshs-00176636
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