Economics, Econometrics and Finance
4 years ago

New research challenges conventional wisdom on time consistency and discounting behaviors.

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HAL (Le Centre pour la Communication Scientifique Directe)
Hyperbolic discounting may be time consistent
Nicolas Drouhin

Paper Summary

The article challenges the idea that only exponential discounting is consistent over time. It shows that hyperbolic discounting can also be time consistent. The researchers used dynamic programming to analyze different conditions for preferences. They found special hyperbolic discount functions that are time consistent and discussed the relationship between time consistency and stationarity.

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