A theory of (relative) discounting |
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Authors: | Efe A. Ok |
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Affiliation: | a Department of Economics, New York University, New York, NY, USA b Department of Economics, University of Michigan, 611 Tappan Street, Ann Arbor, MI 48109, USA |
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Abstract: | We derive a representation theorem for time preferences (on the prize-time space) which identifies a novel notion of relative discounting as the key ingredient. This representation covers a variety of time preference models, including the standard exponential and hyperbolic discounting models and certain non-transitive time preferences, such as the similarity-based and subadditive discounting models. Our axiomatic work thus unifies a number of seemingly disparate time preference structures, thereby providing a tractable mathematical format that allows for investigating certain economic environments without subscribing to a particular time preference model. This point is illustrated by means of an application to sequential bargaining theory. |
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Keywords: | D11 D90 |
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