A simple framework for the axiomatization of exponential and quasi-hyperbolic discounting

Nina Anchugina ()
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Nina Anchugina: The University of Auckland

Theory and Decision, 2017, vol. 82, issue 2, No 2, 185-210

Abstract: Abstract The main goal of this paper is to investigate which normative requirements, or axioms, lead to exponential and quasi-hyperbolic forms of discounting. Exponential discounting has a well-established axiomatic foundation originally developed by Koopmans (Econometrica 28(2):287–309, 1960, 1972) and Koopmans et al. (Econometrica 32(1/2):82–100, 1964) with subsequent contributions by several other authors, including Bleichrodt et al. (J Math Psychol 52(6):341–347, 2008). The papers by Hayashi (J Econ Theory 112(2):343–352, 2003) and Olea and Strzalecki (Q J Econ 129(3):1449–1499, 2014) axiomatize quasi-hyperbolic discounting. The main contribution of this paper is to provide an alternative foundation for exponential and quasi-hyperbolic discounting, with simple, transparent axioms and relatively straightforward proofs. Using techniques by Fishburn (The foundations of expected utility. Reidel Publishing Co, Dordrecht, 1982) and Harvey (Manag Sci 32(9):1123–1139, 1986), we show that Anscombe and Aumann’s (Ann Math Stat 34(1):199–205, 1963) version of Subjective Expected Utility theory can be readily adapted to axiomatize the aforementioned types of discounting, in both finite and infinite horizon settings.

Keywords: Axiomatization; Exponential discounting; Quasi-hyperbolic discounting; Anscombe–Aumann model (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11238-016-9566-8

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