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Hyperbolic discounting of the far-distant future
- Anchugina, Nina, Ryan, Matthew, Slinko, Arkadii
- Economics letters 2017 v.155 pp. 140-143
- discount rate, patients
- 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.