Exponential discounting (original) (raw)
In economics exponential discounting is a specific form of the discount function, used in the analysis of choice over time (with or without uncertainty). Formally, exponential discounting occurs when total utility is given by where ct is consumption at time t, is the exponential discount factor, and u is the . In continuous time, exponential discounting is given by For its simplicity, the exponential discounting assumption is the most commonly used in economics. However, alternatives like hyperbolic discounting have more empirical support.
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| dbo:abstract | In economics exponential discounting is a specific form of the discount function, used in the analysis of choice over time (with or without uncertainty). Formally, exponential discounting occurs when total utility is given by where ct is consumption at time t, is the exponential discount factor, and u is the . In continuous time, exponential discounting is given by Exponential discounting implies that the marginal rate of substitution between consumption at any pair of points in time depends only on how far apart those two points are. Exponential discounting is not dynamically inconsistent. A key aspect of the exponential discounting assumption is the property of dynamic consistency— preferences are constant over time. In other words, preferences do not change with the passage of time unless new information is presented. For example, consider an investment opportunity that has the following characteristics: pay a utility cost of C at date t=2 to earn a utility benefit of B at time t=3. At date t=1, this investment opportunity is considered favorable; hence, this function is: −δC + δ 2 B> 0. Now consider from the perspective of date t=2, this investment opportunity is still viewed as favorable given −C + δB> 0. To view this mathematically, observe that the new expression is the old expression multiplied by 1/δ. Therefore, the preferences at t=1 is preserved at t=2; thus, the exponential discount function demonstrates dynamically consistent preferences over time. For its simplicity, the exponential discounting assumption is the most commonly used in economics. However, alternatives like hyperbolic discounting have more empirical support. (en) En économie, l'actualisation exponentielle est une forme de fonction d'actualisation utilisée dans l'analyse des choix intertemporels (avec ou sans incertitude), supposant un taux constant de dépréciation. Mathématiquement, il y a actualisation exponentielle lorsque l'utilité totale est donnée par , où ct est la consommation au temps t, est le coefficient d'actualisation, et u est la . La formule précédente devient, si le temps est supposé continu, L'actualisation exponentielle suppose que le taux marginal de substitution entre les consommations en deux moments différents ne dépend que de l'écart entre ces moments ; elle ne présente donc pas d'incohérence temporelle. En raison de sa simplicité, l'hypothèse d'actualisation exponentielle est celle qui est le plus souvent utilisée dans les modèles économiques, cependant, des hypothèses alternatives telles que l' ont davantage de confirmations empiriques. (fr) |
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| rdfs:comment | In economics exponential discounting is a specific form of the discount function, used in the analysis of choice over time (with or without uncertainty). Formally, exponential discounting occurs when total utility is given by where ct is consumption at time t, is the exponential discount factor, and u is the . In continuous time, exponential discounting is given by For its simplicity, the exponential discounting assumption is the most commonly used in economics. However, alternatives like hyperbolic discounting have more empirical support. (en) En économie, l'actualisation exponentielle est une forme de fonction d'actualisation utilisée dans l'analyse des choix intertemporels (avec ou sans incertitude), supposant un taux constant de dépréciation. Mathématiquement, il y a actualisation exponentielle lorsque l'utilité totale est donnée par , où ct est la consommation au temps t, est le coefficient d'actualisation, et u est la . La formule précédente devient, si le temps est supposé continu, (fr) |
| rdfs:label | Exponential discounting (en) Actualisation exponentielle (fr) |
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