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Author(s): Gomes, O.
Ferreira-Lopes, A.
Sequeira, T. N.
Date: 2014
Title: Exponential discounting bias
Volume: 113
Number: 1
Pages: 31 - 57
ISSN: 0931-8658
DOI (Digital Object Identifier): 10.1007/s00712-013-0363-3
Keywords: Intertemporal preferences
Exponential discounting
Quasi-hyperbolic discounting
Optimal growth
Habit persistence
Transitional dynamics
Abstract: We address intertemporal utility maximization under a general discount function that nests the exponential discounting and the quasi-hyperbolic discounting cases as particular specifications. The suggested framework intends to capture one important piece of behavioral evidence typically found when addressing the way agents discount the future, namely the evidence pointing to the prevalence of decreasing impatience. Decreasing impatience can be perceived as a bias relatively to what would be a benchmark exponential discounting setting, and is modeled as such. The general discounting framework is used to approach a standard optimal growth model in discrete time. Transitional dynamics and stability properties of the corresponding dynamic setup are studied. An extension of the standard utility maximization model to the case of habit persistence is also considered.
Peerreviewed: yes
Access type: Open Access
Appears in Collections:BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica

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