Hyperbolic Discounting of the Far-Distant Future

Nina Anchugina, Matthew Ryan and Arkadii Slinko

Papers from arXiv.org

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.

Date: 2017-02
New Economics Papers: this item is included in nep-ene and nep-upt
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