Discounting the Subjective Present and Future

Jinrui Pan, Craig Webb, Horst Zank

Research output: Working paper

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Abstract

Liminal discounting, the model proposed here, generalises exponential discounting in a parsimonious way. It allows for well-known departures, whilst maintaining its elegance and tractability. A liminal discounter has a constant rate of time preference before and after some threshold time; the liminal point. If the liminal point is an absolute point in time, liminal discounting captures time consistent behaviour. If it is expressed in relative time, liminal discounting captures time invariant behaviour. We provide preference foundations for all cases, showing how the liminal point is derived endogenously from behaviour. We give applications to Rubinstein bargaining games, showcasing the model’s use in microeconomic theory.
Original languageEnglish
Place of PublicationUniversity of Manchester
Number of pages53
Publication statusPublished - 5 Apr 2013

Publication series

NameManchester Economics Discussion Paper Series
PublisherEconomics, School of Social Sciences, The University of Manchester
No.EDP-1305

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