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Some Common Confusions about Hyperbolic Discounting

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  • Eric Rasmusen

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

There is much confusion over what "hyperbolic discounting" means. I argue that what matters is the use of relativistic instead of objective time, not the shape of the discount function.

Suggested Citation

  • Eric Rasmusen, 2008. "Some Common Confusions about Hyperbolic Discounting," Working Papers 2008-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2008-11
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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2008-11-rasmusen.pdf
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    References listed on IDEAS

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    4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    5. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 573-597.
    6. George-Marios Angeletos & David Laibson & Andrea Repetto & Jeremy Tobacman & Stephen Weinberg, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
    7. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
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    Cited by:

    1. Caputo, Michael R., 2013. "The intrinsic comparative dynamics of infinite horizon optimal control problems with a time-varying discount rate and time-distance discounting," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 810-820.
    2. Eric Rasmusen, 2012. "Internalities and paternalism: applying the compensation criterion to multiple selves across time," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(4), pages 601-615, April.
    3. Gahramanov, Emin, 2013. "Survival misperception, time inconsistency, and implications for life-cycle saving and welfare," Economic Modelling, Elsevier, vol. 32(C), pages 539-550.
    4. Habis, Helga & Perge, Laura, 2018. "Pató Pál úr modellezése. Irracionalitás az intertemporális döntéshozatalban [Pál Pató-style modelling. Irrationality in inter-temporal decision-making]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 619-631.
    5. Eric Crampton & Matt Burgess & Brad Taylor, 2011. "The Cost of Cost Studies," Working Papers in Economics 11/29, University of Canterbury, Department of Economics and Finance.

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    Keywords

    time inconsistency; hyperbolic discounting;

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