Hyperbolic discounting of the far-distant future

Nina Anchugina, Matthew Ryan and Arkadii Slinko

Economics Letters, 2017, vol. 155, issue C, 140-143

Abstract: We prove an analogue of Weitzman’s (1998) famous result that an exponential discounter who is uncertain of the appropriate exponential discount rate should discount the far-distant future using the lowest (i.e., most patient) of the possible discount rates. Our analogous result applies to a hyperbolic discounter who is uncertain about the appropriate hyperbolic discount rate. In this case, the far-distant future should be discounted using the probability-weighted harmonic mean of the possible hyperbolic discount rates.

Keywords: Hyperbolic discounting; Uncertainty (search for similar items in EconPapers)
JEL-codes: D71 D81 D90 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:155:y:2017:i:c:p:140-143

DOI: 10.1016/j.econlet.2017.03.031

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