T he optimal allocation of natural gas resources to various uses such as final and intermediate consumption, injection into oil fields, and exports can help policymakers to use this kind of resources efficiently. Empirical evidence support using hyperbolic discount rates instead of fixed discount rates in the economic literature. The purpose of this study is to maximize the social we...

We thank the editor and an anonymous referee. Any errors are our own. Abstract Using the WACC to Value Real Options We present a real option valuation using the weighted average cost of capital (WACC). This is an alternative to risk-neutral real option valuation. Using the WACC involves a marginal increase in mathematical complexity, but it is easy to implement in a spreadsheet, and it is easy ...

In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless account. The market coefficients and discount factor switches according to a finite state Markov chain. The change in the discount rate le...

Using a simple arbitrage argument, positivists claim that the interest rate provides the right basis to fix the discount rate to evaluate green investment projects. The real interest rate observed in the U.S. during the XXth century has been around 1% and 2%. On the contrary, ethicists estimate the discount rate by the marginal rate of substitution between current and future consumption. From c...

Disagreements about the value of the utility discount rate--the rate at which our concern for the welfare of future people declines with their distance from us in time--are at the heart of the debate about the appropriate intensity of climate policy. Seemingly small differences in the discount rate yield very different policy prescriptions, and no consensus "correct" value has been identified. ...

Intertemporal preferences are di¢ cult to measure. We estimate time preferences using a structural bu¤er stock consumption model and the Method of Simulated Moments. The model includes stochastic labor income, liquidity constraints, child and adult dependents, liquid and illiquid assets, revolving credit, retirement, and discount functions that allow short-run and longrun discount rates to di¤e...

From monetary policies to the climate change problem, from the burden of private credit card debts to the evaluation of public projects, discount rate is the central issue, yet there is little clear understanding about the nature of discounting. In this paper, applying a newly developed production theory, we discuss how discount rate is related to other factors in social systems, such as risk, ...

Discount rate changes always receive considerable attention in financial markets. Two hypotheses compete to explain financial market reactions: the direct ‘borrowing cost effect’ and the announcement effect. This paper examines the issue for the Bundesbank’s discount rate changes after 1979. Summing up we find that market reactions cannot be attributed to a direct borrowing cost effect but excl...