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Management Science Vol. 54 No. 10 2008

Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience

Diego Nocetti1; Elyès Jouini2; Clotilde Napp3

1 School of Business, Clarkson University, Potsdam, New York 13699 · 2 Ceremade, Université Paris-Dauphine, F-75016 Paris, France · 3 CNRS, UMR7088, F-75016 Paris, France, and DRM, Université Paris-Dauphine, F-75016 Paris, France

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Abstract

This paper derives the properties of the discount rate that should be applied to a public-sector project when the affected population has heterogeneous degrees of impatience. We show that, for any distribution of discount rates, the social discount rate has the following properties: it decreases over time, it is lower than the average of the discount rates in the population, and it converges to the discount rate of the most patient individual in the economy. These properties hold for both constant and decreasing individual discount rates. Finally, we evaluate how changes in the distribution of individual discount rates affect the social discount rate.

DOI
10.1287/mnsc.1080.0904
Volume
54
Issue
10
Pages
1822-1826
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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