New discounting functions

Pavlo R. Blavatskyy

Economics Letters, 2024, vol. 235, issue C

Abstract: Discounting functions weight utilities of outcomes received in different moments of time. A classic exponential (hyperbolic) discounting function is derived from absolute (relative) time stationarity—preferences do not change if time delays are increased/decreased by the same amount (percentage). When decision makers are sensitive to outcomes received in the near future and relatively less sensitive to outcomes received in a far-away future, it may be appropriate to transform our usual chronological time (running from zero to infinity) into a normalized time (between zero and one). New discounting functions are derived by imposing absolute and relative stationarity on such normalized time.

Keywords: Intertemporal choice; Time preference; Discounted utility; Exponential discounting; Hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176524000430
Full text for ScienceDirect subscribers only

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:eee:ecolet:v:235:y:2024:i:c:s0165176524000430

DOI: 10.1016/j.econlet.2024.111559

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().