Discounting in an Uncertain World - Disentangling the Debate on the Weitzman-Gollier Puzzle

Wolfgang Buchholz ()

No 4967, CESifo Working Paper Series from CESifo

Abstract: Under conditions of risk it makes a difference whether the discount rate is determined as an expected present or as an expected future value. This difference which is dubbed as the Weitzman-Gollier puzzle has stimulated an intensive discussion which, however, is somewhat confusing. In this paper we try to provide some clarification by separating the different topics of the debate. In particular we give an intuitive explanation for the divergence between the outcomes of the present and the future value approach. Moreover, we show that a declining time patter of the discount rate which is the major implication of Weitzman’s present value approach can also be obtained in many other and more appealing ways.

Keywords: cost-benefit analysis; discounting; risk; Weitzman-Gollier Puzzle (search for similar items in EconPapers)
JEL-codes: D61 D81 D99 G11 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4967

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