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Abstract

Problems with non-exponential discounting constitute an important subclass of the family of time-inconsistent problems. To see how the general theory works in a more concrete case, we now consider a fairly general model class with non-exponential discounting. As a special case, we will then study the case of hyperbolic discounting, and we will obtain an analytic solution for an example with logarithmic utility. We also discuss a generalization of the Euler equation for hyperbolic consumers, the so-called hyperbolic Euler equation of Harris and Laibson (Econometrica 69:935–957, 2001).

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Björk, T., Khapko, M., Murgoci, A. (2021). Non-exponential Discounting. In: Time-Inconsistent Control Theory with Finance Applications. Springer Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-81843-2_7

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