Hyperbolic Discount Functions, Undersaving, and Savings Policy

@inproceedings{Laibson1996HyperbolicDF,
  title={Hyperbolic Discount Functions, Undersaving, and Savings Policy},
  author={David I. Laibson},
  year={1996}
}
Studies of animal and human behavior suggest that discount functions are approximately hyperbolic (Ainslie, 1992). I analyze an economy with complete markets which is populated by hyperbolic consumers. I identify two ways in which this economy can be distinguished from an exponential economy. First, hyperbolic discounting predicts the empirical regularity that the elasticity of intertemporal substitution is less than the inverse of the coefficient of relative risk aversion. Second, hyperbolic… 

General Equilibrium Tax Policy with Hyperbolic Consumers

Recently David Laibson (1998) and others have argued in favor of usinghyperbolic discount functions. The purpose of this paper is to investigatewhether conventional wisdom, based on the standard

The Hyperbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation

Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper

Rising Indebtedness and Hyperbolic Discounting: A Welfare Analysis

Is the observed rapid increase in consumer debt over the last three decades good news for consumers? This paper quantitatively studies macroeconomic and welfare implications of relaxing borrowing

Saving and Dissaving with Hyperbolic Discounting

We study Markov equilibria in the standard time-inconsistent hyperbolic discounting model set in discrete-time. We provide simple conditions under which all Markov equilibria feature saving or

A Monthly Struggle for Self-Control? Hyperbolic Discounting, Mental Accounting, and the Fall in Consumption Between Paydays

An alternative conception of consumer choice has recently gained the attention of economists, which allows for two closely related departures from the standard model. First, consumers may have

Saving and Dissaving with Hyperbolic Discounting

Is the standard hyperbolic†discounting model capable of robust qualitative predictions for savings behavior? Despite results suggesting a negative answer, we provide a positive one. We give

Quasi-hyperbolic discounting, paternalism and optimal mixed taxation

Intertemporal Substitution and Hyperbolic Discounting

Evidence from behavioural experiments suggests that intertemporal preferences reflect a hyperbolic discount function. This paper shows that in contrast to exponential discounting, the elasticity of
...

References

SHOWING 1-10 OF 33 REFERENCES

Golden Eggs and Hyperbolic Discounting

Hyperbolic discount functions induce dynamically inconsistent preferences, implying a motive for consumers to constrain their own future choices. This paper analyzes the decisions of a hyperbolic

OPTIMAL TAXATION OF CAPITAL INCOME IN GENERAL EQUILIBRIUM WITH INFINITE LIVES

This paper analyzes the optimal tax on capital income in general equilibrium models of the second best. Agents have infinite lives and utility functions which are extensions from the Koopmans form.

Consumption Growth Parallels Income Growth: Some New Evidence

This paper argues that the versions of both permanent income and life-cycle theories which have recently become fashionable are inconsistent with the grossest features of cross-country and

Precautionary Saving and Social Insurance

Micro data studies of household saving often find a significant group in the population with virtually no wealth, raising concerns about heterogeneity in motives for saving. In particular, this

National Saving and Economic Performance

The past decade has witnessed a decline in saving throughout the developed world—the United States has the dubious distinction of leading the way. The consequences can be serious. For individuals,

Anomalies in Intertemporal Choice: Evidence and an Interpretation

Research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility (EU) anomalies—behaviors that violate the expected utility axioms. The

Procrastination and Obedience

In this lecture I shall focus on situations involving repeated decisions with time inconsistent behavior. Although each choice may be close to maximizing and therefore result in only small losses,

On Second-Best National Saving and Game-Equilibrium Growth

This chapter highlights the question whether second-best saving is greater or smaller than first-best saving when given future saving is non-optimal from the standpoint of the present generation. The

Specious reward: a behavioral theory of impulsiveness and impulse control.

TLDR
This work has shown that impulsiveness seems to be best accounted for by the hyberbolic curves that have been found to describe the decline in effectiveness of rewards as the rewards are delayed from the time of choice.