Using data from financial reorganization plans filed by insolvent Canadian firms, we estimate the discount rate implicit in the unsecured creditors' reorganization decision. Using (HARA) utility functions, we find the implicit monthly discount rate of creditors to be 4.9%, which corresponds to an annual discount rate of 77%. This is 7 to 10 times higher than discount rates used in previous empi...

This paper reexamines the time consistency of discount functions as analyzed by Strotz (1956) and Koopmans (1960). Following on an observation by Heal (1998) regarding the time consistency of logarithmic discounting, I fully characterize the class of time consistent—but not necessarily autonomous—discount functions. I use my findings to explain an apparent “paradox” in the use of the gamma disc...

Which rates should we use to discount costs and benefits of different nature at different time horizons? We answer to this question by considering a representative agent consuming two goods whose availability evolves over time in a stochastic way. We extend the Ramsey rule by taking into account of the degree of substitutability between the two goods and of the uncertainty surrounding the econo...

This paper discusses the tough love model of intergenerational altruism we developed and some of on-going empirical research on tough love behavior in survey data collected in Japan and United States. The tough love model modifies the Barro-Becker standard altruism model in two ways. First, the child’s discount factor is endogenously determined, so that low consumption at young age leads to a h...

We examine the effects o subscription behavior and wealth transferring controlled by larger shareholders on price discount of private placement. Price discount of private placement and wealth transferring effect exhibits a significant trend when larger shareholders subscribe more private placement shares. Shares proportion subscribed by larger shareholders, shares size of private placement and ...

Recommender systems help users to encounter information or items that are of interest to them. Prior work on recommender systems has focused on eliciting preferences for items and neglected the personal traits in discount sensitivity. In this paper, we propose a recommender system that incorporates the influence of discounts. The effectiveness of the model is verified using a public retail data...

This paper provides a new explanation of why price reductions take place on a regular basis. It is argued that the demand for a ...rm’s product drops over time because of the erosion of consumers’ brand recall, which in turn can be boosted by price cuts. After analyzing the dynamic optimal choice of price discounts in both monopoly and duopoly settings, I show that a monopolist’s optimal pricin...

This paper proposes and studies a tractable subset of Nash equilibria, belieffree review-strategy equilibria, in repeated games with private monitoring. The payoff set of this class of equilibria is characterized in the limit as the discount factor converges to one for games where players observe statistically independent signals. As an application, we develop a simple sufficient condition for ...

This paper analyzes the diversification-value puzzle from the Real Options (RO) approach. Our proposal conceives corporate diversification as a process which involves both the sequential replacement of prior acquired investment opportunities by assets-in-place and the generation of new valuable growth options. We argue that this conceptual framework allows to explain both documented diversifica...

We consider an ergodic stochastic control problem for a class of one-dimensional Itô processes where the available control is an added bounded variation process. The corresponding infinite horizon discounted control problem is solved in [28]. Here, we show that, as the discount factor approaches zero, the optimal strategies derived in [28] “converge” to an optimal strategy for the ergodic contr...