Modern finance theory is based on the competitive market paradigm (see Duffie 1992, Jarrow and Turnbull 1996). The competitive market paradigm has two implicit assumptions. The first is that security markets are perfectly elastic—that is, traders act as price takers. Price takers believe that they can buy and sell as many shares of a security as they wish without changing the price. The second ...

Ren-Raw Chen is a professor in the Finance Area of the Graduate School of Business Administration at Fordham University in New York, NY. [email protected] This article is motivated by the fact that the majority of securities in the financial markets are not frequently traded and hence a discount can be applied to properly ref lect such a deprived privilege. First, only a small fraction of corpo...

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...

2. Offer Patient Discounts Only to Self-Pay Patients Discounts, such as prompt-pay and cash-up-front discounts, should not be given to insured patients in Wisconsin. Interestingly, the federal AKS allows legitimate discounts reflecting actual savings to the provider.5 However, such discounts would be considered a reduction or elimination of cost-sharing amounts, which are prohibited by Wis. Sta...

The complexity of modern networks calls for decentralized control schemes where each user makes its control decisions independently based on some individual performance objectives. The operating points of such noncooperative networks are the Nash equilibria of the underlying control game. Nash equilibria are generically inefficient and lead to suboptimal network performance. Using routing as a ...

This paper provides new evidence supporting the rationality of closed-end fund discounts by analyzing the time-series dynamics of individual fund discounts and their relation to portfolio performance and manager turnover. We show that discount changes reflect rational investor learning about fund manager skills, as well as investor anticipation of manager replacement events. Specifically, prior...

We assess the impact of institutions on Chinese firms’ corporate investment in an investment Euler equation framework. We allow the variables measuring institutions to affect the rate at which firm managers discount future investment payoffs. Applying generalized method of moments estimators to large samples of Chinese firms, we estimate the stochastic discount rates derived from actual investm...

Most algorithms for solving Markov decision processes rely on a discount factor, which ensures their convergence. It is generally assumed that using an artificially low discount factor will improve the convergence rate, while sacrificing the solution quality. We however demonstrate that using an artificially low discount factor may significantly improve the solution quality, when used in approx...

A Flexible Test for Present Bias and Time Preferences Using Land-Lease Contracts When agents have present bias, they discount more between now and the next period than between period t (> 1) and t + 1. How fast the future discount rate (evaluated today) decays is an empirical question. We show that the discount function can be non-parametrically identified with contracts that specify payments t...