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Evaluating time streams of income

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  • Bell, David E

Abstract

When a decision maker considers possible returns from a business project or investment, he often faces the problem that these returns are not all received at the same time, and thus he must make some adjustments to take account of his time preference for money. After a review of discounting, a utility theory approach is made by developing a two-attribute utility function u(x, t) which represents the desirability of an income of x at a time t in the future. Assumptions to simplify the assessment of this function are considered. Then u(x, t) is used to form a criterion for evaluating infinite time streams of income.

Suggested Citation

  • Bell, David E, 1974. "Evaluating time streams of income," Omega, Elsevier, vol. 2(5), pages 691-699, October.
    • Handle: RePEc:eee:jomega:v:2:y:1974:i:5:p:691-699
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    Cited by:

    1. Manel Baucells & Samuel E. Bodily, 2024. "The Discount Rate for Investment Analysis Applying Expected Utility," Decision Analysis, INFORMS, vol. 21(2), pages 125-141, June.
    2. Chai, Junyi, 2021. "A model of ambition, aspiration and happiness," European Journal of Operational Research, Elsevier, vol. 288(2), pages 692-702.
    3. Manel Baucells & Rakesh K. Sarin, 2007. "Satiation in Discounted Utility," Operations Research, INFORMS, vol. 55(1), pages 170-181, February.
    4. Junyi Chai, 2023. "A Behavioral Foundation of Satiation and Habituation," Mathematics, MDPI, vol. 11(3), pages 1-18, January.
    5. Ying He & James S. Dyer & John C. Butler, 2013. "On the Axiomatization of the Satiation and Habit Formation Utility Models," Operations Research, INFORMS, vol. 61(6), pages 1399-1410, December.
    6. Ünsal Özdilek, 2021. "Sensing Happiness in Senseless Information," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 16(5), pages 2059-2084, October.
    7. Manel Baucells & Rakesh K. Sarin, 2010. "Predicting Utility Under Satiation and Habit Formation," Management Science, INFORMS, vol. 56(2), pages 286-301, February.
    8. Manel Baucells & Rakesh Sarin, 2007. "Evaluating Time Streams of Income: Discounting What?," Theory and Decision, Springer, vol. 63(2), pages 95-120, September.

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