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Hyperbolic discounting of the far-distant future

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  • Anchugina, Nina
  • Ryan, Matthew
  • Slinko, Arkadii

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.

Suggested Citation

  • Anchugina, Nina & Ryan, Matthew & Slinko, Arkadii, 2017. "Hyperbolic discounting of the far-distant future," Economics Letters, Elsevier, vol. 155(C), pages 140-143.
    • Handle: RePEc:eee:ecolet:v:155:y:2017:i:c:p:140-143
    DOI: 10.1016/j.econlet.2017.03.031
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    References listed on IDEAS

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    More about this item

    Keywords

    Hyperbolic discounting; Uncertainty;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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