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One reason to call an activity a vice and suppress it is that it reduces a person’s future happiness more than it increases his present happiness. Gruber and Koszegi (2001) show how a vice tax can increase a person’s welfare in a model of multiple selves with hyperbolic preferences across...
Persistent link: https://www.econbiz.de/10005453597
There is much confusion over what "hyperbolic discounting" means. I argue that what matters is the use of relativistic instead of objective time, not the shape of the discount function.
Persistent link: https://www.econbiz.de/10005453605
Why do people have ambiguity aversion, preferring, a gamble with a 50% chance of success to one whose expected probability of success is 50% but where that 50% is an unbiased estimate? The answer modelled here, in the spirit of the career concerns literature, is learning: a risk-averse person...
Persistent link: https://www.econbiz.de/10005696167