Gamma discounting and expected net future value

Maximizing the expected net future value as an alternative strategy to gamma discounting

We examine the problem of selecting the discount rate for far distant cash-flows when there is much uncertainty about what will be the future investment opportunities in the economy. We show that it is efficient to take a discount rate that is increasing with the time horizon, and that this rate should tend to the largest possible rate as the horizon tends to infinity. These recommendations are...

Expected net present value, expected net future value, and the Ramsey rule

Weitzman (1998) showed that when future interest rates are uncertain, using the expected net present value implies a term structure of discount rates that is decreasing to the smallest possible interest rate. On the contrary, using the expected net future value criteria implies an increasing term structure of discount rates up to the largest possible interest rate. We reconcile the two approach...

Expected net present value , expected net future value , and the Ramsey rule Christian

Weitzman (1998) showed that when future interest rates are uncertain, using the expected net present value implies a term structure of discount rates that is decreasing to the smallest possible interest rate. On the contrary, using the expected net future value criteria implies an increasing term structure of discount rates up to the largest possible interest rate. We reconcile the two approach...

Expected Net Present Value of Sample Information

Gamma Discounting

By incorporating the probability distribution directly into the analysis, this paper proposes a new theoretical approach to resolving the perennial dilemma of being uncertain about what discount rate to use in cost-benefit analysis. A numerical example is constructed from the results of a survey based on the opinions of 2,160 economists. The main finding is that even if every individual believe...