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Hyperbolic Discounting: A Recursive Formulation and An Application to Economic Growth

Published on: April 2009​
Author:
Genre: Economics/Finance​ Category: Research Report/ Research Paper/ White Paper​
An important strand of the economics literature has recently paid attention to the study of psychological biases that lead individuals to undersave, procrastinate or, in general, display a present-bias in their decision making. These biases, as represented by preferences exhibiting truly hyperbolic discounting, may have an important impact on economic growth but have not been incorporated in economic growth modelling. This paper by Coury and Dave formulates such preferences in a recursive formulation, which allows for the use of dynamic programming techniques commonly used in the economic growth literature.

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