IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Discounting, Patience, and Dynamic Decision Making

  • John Quah
  • Bruno Strulovici

Whether they are financial, economic, or psychological, discount rates affect most economic decisions: investment and savings, hirings and firings, defaults and refinancing, financial and economic reforms, learning and experimentation, and any other decision with long-term consequences, such as gas emissions control. This paper studies these questions in a unified framework, providing general insights and results showing how discounting affects i) the expected utility of an agent, ii) the timing and the magnitude of his decisions, and iii) the path of underlying state variables controlled by the agent. The analysis includes the case of a time-inconsistent agent and of stochastic discounting.

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: http://www.economics.ox.ac.uk/materials/working_papers/paper555.pdf
Download Restriction: no

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 555.

as
in new window

Length:
Date of creation: 01 Jun 2011
Date of revision:
Handle: RePEc:oxf:wpaper:555
Contact details of provider: Postal:
Manor Rd. Building, Oxford, OX1 3UQ

Web page: http://www.economics.ox.ac.uk/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  2. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  3. Nachman, David C., 1975. "Risk aversion, impatience, and optimal timing decisions," Journal of Economic Theory, Elsevier, vol. 11(2), pages 196-246, October.
  4. Bruno Strulovici, 2010. "Learning While Voting: Determinants of Collective Experimentation," Econometrica, Econometric Society, vol. 78(3), pages 933-971, 05.
  5. Arrow, Kenneth J & Levhari, David, 1969. "Uniqueness of the Internal Rate of Return with Variable Life of Investment," Economic Journal, Royal Economic Society, vol. 79(315), pages 560-66, September.
  6. Ted O'Donoghue & Matthew Rabin, 1996. "Doing It Now or Later," Discussion Papers 1172, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Sen, Amartya, 1975. "Minimal conditions for monotonicity of capital value," Journal of Economic Theory, Elsevier, vol. 11(3), pages 340-355, December.
  8. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
  9. Hayne E. Leland., 1994. "Corporate Debt Value, Bond Covenants, and Optimal Capital Structure," Research Program in Finance Working Papers RPF-233, University of California at Berkeley.
  10. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
  11. Cripps, Martin William & Keller, R Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," CEPR Discussion Papers 3814, C.E.P.R. Discussion Papers.
  12. R. H. Strotz, 1955. "Myopia and Inconsistency in Dynamic Utility Maximization," Review of Economic Studies, Oxford University Press, vol. 23(3), pages 165-180.
  13. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  14. Drazen Prelec, 2004. "Decreasing Impatience: A Criterion for Non-stationary Time Preference and "Hyperbolic" Discounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 511-532, October.
  15. John Quah & Bruno Strulovici, 2007. "Comparative Statics, Informativeness, and the Interval Dominance Order," Economics Series Working Papers 2007-WO4, University of Oxford, Department of Economics.
  16. Ross, Stephen A. & Spatt, Chester S. & Dybvig, Philip H., 1980. "Present values and internal rates of return," Journal of Economic Theory, Elsevier, vol. 23(1), pages 66-81, August.
  17. Flemming, J S & Wright, J F, 1971. "Uniqueness of the Internal Rate of Return: A Generalisation," Economic Journal, Royal Economic Society, vol. 81(322), pages 256-63, June.
  18. James E. Foster & Tapan Mitra, 2003. "Ranking investment projects," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(3), pages 469-494, October.
  19. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
  20. Gustavo Manso & Bruno Strulovici & Alexei Tchistyi, 2010. "Performance-Sensitive Debt," Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1819-1854.
  21. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
Full references (including those not matched with items on IDEAS)

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:oxf:wpaper:555. 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: (Monica Birds)

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.