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Optimal Discounting

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  • Jawwad Noor
  • Norio Takeoka

Abstract

The agent is modeled as a current self that optimally incurs a cognitive cost of empathizing with future selves. The model unifies well‐known experimental and empirical findings in intertemporal choice and enriches the multiple selves model with a notion of self‐control. The defining feature of the model is magnitude‐decreasing impatience: greater patience toward larger rewards. Two behavioral definitions of magnitude‐decreasing impatience are provided and the model is characterized under each of them.

Suggested Citation

  • Jawwad Noor & Norio Takeoka, 2022. "Optimal Discounting," Econometrica, Econometric Society, vol. 90(2), pages 585-623, March.
    • Handle: RePEc:wly:emetrp:v:90:y:2022:i:2:p:585-623
    DOI: 10.3982/ECTA16050
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    References listed on IDEAS

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    Cited by:

    1. Tang, Rui & Zhang, Mu, 2023. "Motivated naivete," Journal of Economic Theory, Elsevier, vol. 209(C).

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