Decreasing Impatience: A Criterion for Non‐stationary Time Preference and “Hyperbolic” Discounting

Drazen Prelec

Scandinavian Journal of Economics, 2004, vol. 106, issue 3, 511-532

Abstract: Despite recent interest in hyperbolic discounting, there has been little discussion of exactly what property of time preferences is instantiated by hyperbolic or quasi‐hyperbolic functional forms. The paper revives an earlier proposal in Prelec (1989) that the key property is Pratt–Arrow convexity of the log of the discount function, which corresponds to decreasing impatience(DI) at the level of preferences. DI provides a natural criterion for assessing the severity of departure from stationarity in that greater DI is equivalent to more choices of dominated options in two‐stage decision problems, as well as greater convexity of the log of the discount function. Inefficient choices may arise as intentional precommitments, or as unintended reversals of preference by “naïve” agents.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

Downloads: (external link)
https://doi.org/10.1111/j.0347-0520.2004.00375.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:106:y:2004:i:3:p:511-532

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().