An equilibrium approach for Gamma Discounting.

We address the problem of a social planner who, as in Weitzman (2001), gathers data on discount rates and wants to infer the socially efficient consumption discount rate. We propose an equilibrium approach and we analyse the expression and the properties of the resulting equilibrium discount rate. We provide equilibrium foundations for Gamma discounting at the collective level even though individual agents are classical exponential discounters. We analyse the impact of shifts in the distributions of individual discount rates on the shape of the yield curve. Finally, we apply our approach to Weitzman (2001)'s data to propose discount rates for public sector Cost-Bene t Analysis, in particular for the long term.