An Explanation of Hyperbolic Marginal Utility from Money

N. Arad

Working Papers from Tel Aviv

Abstract: "Hyperbolic discount functions are characterized by a relatively high discount rate over short horizons and a relatively low discount rate over long horizon" [Laibson 1997, p. 445]. In this theoretical note, we show that individuals hyperbolically discount marginal utility from money when they follow a cognitive procedure in which they believe that their wealth might increase or decrease in each future period under the constraint of a small-perceived probability that wealth will deteriorate below its current level.

Keywords: DISCOUNT RATE; MONEY; WEALTH (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
Date: 2000
References: Add references at CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:fth:teavfo:2000-25

Access Statistics for this paper

More papers in Working Papers from Tel Aviv Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.. Contact information at EDIRC.
Series data maintained by Thomas Krichel ().