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Christian Gollier and Martin L. Weitzman How should the distant future be discounted when discount rates are uncertain? article The so-called “Weitzman–Gollier puzzle” is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future discount rates appear to give diametrically opposed results. The puzzle is resolved when agents optimize their consumption plans. The long run discount rate declines over time toward its lowest possible value.

How should the distant future be discounted when discount rates are uncertain?

Christian Gollier and Martin L. Weitzman

Economics Letters, vol. 107, no. 3, 2010, pp. 350–353

Abstract

The so-called “Weitzman–Gollier puzzle” is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future discount rates appear to give diametrically opposed results. The puzzle is resolved when agents optimize their consumption plans. The long run discount rate declines over time toward its lowest possible value.

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