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Pareto criterion and long-term perspective criterion under myopic discounting

Minwook Kang () and Lei Wang ()
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Minwook Kang: Nanyang Technological University
Lei Wang: Nanyang Technological University

Economics Bulletin, 2019, vol. 39, issue 1, 24-32

Abstract: Under myopic discounting, which encompasses the famous psychological and economics model, hyperbolic discounting preferences, this paper shows that efficiency by the Pareto criterion is a sufficient condition for efficiency by the long-term perspective criterion. This result provides additional justification for Pareto-improving policies under myopic discounting by showing that such policies improve normative preferences as well. As an application of our result, we provide an example of Laibson's Pareto-improving consumption tax.

Keywords: Pareto criterion; long-term perspective criterion; hyperbolic discounting; present-bias (search for similar items in EconPapers)
JEL-codes: D6 H2 (search for similar items in EconPapers)
Date: 2019-01-10
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