What is the best way to incorporate a risk premium into the discount rate schedule for a real investment project with uncertain payo¤s? The standard CAPM formula suggests a beta-weighted average of the return on a safe investment and the mean return on an economy-wide representative risky investment. Suppose, though, that the project constitutes a tail-hedged investment, meaning that it is expe...

Decisions with intergenerational consequences may leave future generations worse off (i.e., not be Pareto optimal) if costs and benefits are not discounted correctly. We point out that this happens if the conventional social discount rate is applied to intergenerational costs: with this rate the justification of intergenerational costs (benefits of a project are invested and the proceeds can co...

The paper analyzes the social discount rate under uncertainty. It employs a preference representation that enriches the characterization of uncertainty by a degree of confidence into probabilistic descriptions of the world. Special cases of the model comprise discounting under smooth ambiguity aversion as well as discounting under a disentanglement of risk aversion and aversion to intertemporal...

This paper investigates the properties of intergenerationally equitable discounting by using an axiomatically well-founded welfare function which was originally developed by Epstein (1983), and more recently extended by Bommier and Zuber (2008). In stead of seeking for the appropriate value of social rate of time preference, intergenerational equity is incorporated at axiomatic level. I show th...

We propose a theory of intertemporal choice that is robust to specific assumptions on the discount rate. One class of models requires that one utility stream be chosen over another if and only if its discounted value is higher for all discount factors in a set. Another model focuses on an average discount factor. Yet another model is pessimistic, and evaluates a flow by the lowest available dis...