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Foundations and Properties of Time Discount Functions

Ali al-Nowaihi () and Sanjit Dhami ()

No 14/11, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: A critical element in all discounted utility models is the specification of a discount function. We introduce three functions: the delay, speedup and generating functions. Each can be uniquely elicited from behaviour. The delay function determines stationary and the common difference effect. The speedup function determines impatience. Additivity is jointly determined by the delay and speedup functions. The speedup and generating functions jointly determine a unique discount function. Conversely, a continuous discount function determines unique speedup and generating functions.

Keywords: hyperbolic discounting; nonadditivity; impatience; prospect theory; delay function; speedup function; generating function. (search for similar items in EconPapers)
JEL-codes: C60 D91 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-mic and nep-upt
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Working Paper: Foundations and Properties of Time Discount Functions (2013) Downloads
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