Optimal Discounting

Jawwad Noor and Norio Takeoka

Econometrica, 2022, vol. 90, issue 2, 585-623

Abstract: The agent is modeled as a current self that optimally incurs a cognitive cost of empathizing with future selves. The model unifies well‐known experimental and empirical findings in intertemporal choice and enriches the multiple selves model with a notion of self‐control. The defining feature of the model is magnitude‐decreasing impatience: greater patience toward larger rewards. Two behavioral definitions of magnitude‐decreasing impatience are provided and the model is characterized under each of them.

Date: 2022
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