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We prove an analogue of Weitzman’s (1998) famous result that an exponential discounter who is uncertain of the appropriate exponential discount rate should discount the far-distant future using the lowest… Click to show full abstract
We prove an analogue of Weitzman’s (1998) famous result that an exponential discounter who is uncertain of the appropriate exponential discount rate should discount the far-distant future using the lowest (i.e., most patient) of the possible discount rates. Our analogous result applies to a hyperbolic discounter who is uncertain about the appropriate hyperbolic discount rate. In this case, the far-distant future should be discounted using the probability-weighted harmonic mean of the possible hyperbolic discount rates.
Journal Title: Economics Letters
Year Published: 2017
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