Uncertain discount and hyperbolic preferences

Daniele Pennesi ()

Theory and Decision, 2017, vol. 83, issue 3, No 2, 315-336

Abstract: Abstract This paper studies the interaction between savagean uncertainty and time preferences. We introduce a variation of the discounted subjective expected utility model, where time preferences are state dependent. Before uncertainty is resolved, the individual is unsure about the discount factor that will be used, even when evaluating certain payoffs. The model can account for the present bias and diminishing impatience, even if the future is discounted geometrically. The present bias disappears when the immediate payoff becomes uncertain. Although preferences are not stationary, choices may be time consistent.

Keywords: Diminishing impatience; Savagean uncertainty; Hyperbolic discounting; Time consistency (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Working Paper: Uncertain discount and hyperbolic preferences (2015)
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DOI: 10.1007/s11238-017-9603-2

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