Hyperbolic discounting and exponentiated demand: Modeling demand for cigarettes in three dimensions

Rzeszutek, Mark J.; Kaplan, Brent A.; Traxler, Haily K.; Franck, Christopher T.; Koffarnus, Mikhail N.

doi:10.1002/jeab.818

“…As a result of empirical time anomalies -(climate change, size effects, profit-loss asymmetry, excessive discount rates, dynamic inconsistency (discount rate not constant over time)) -, the hyperbolic discounting approach has been developed (Beck, 2014;Rzeszutek et al, 2023).…”

Section: The Time Preference and The Discount Ratementioning

confidence: 99%

Untitled

2023

DIEM Dubrovnik International Economic Meeting

0

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The purpose of the paper is to present an example for the electrification of rural Africa. We will discuss the preconditions, necessities and obstacles of building a solar power plant in rural Niger. For the energy supply of a small village in West Africa a solar pilot plant (20 kWp solar plant with battery storage) is installed. This energy hub makes it possible to provide solar-powered electricity for the town, operate a (ground) water pumping system-delivering water for households and for irrigation of fields. The aim of the paper is to determine the social and individual welfare effects of the new energy system. Therefore, the social well-being of the village is analysed by the social return on investment (LSROI) model. The analysis starts with an empirical survey of the households of the village. The villagers were asked to assess the benefits of the new solar power plant investment for their household and for the whole village. Investment and household valuation are intertemporal decisions whose consequences occur at different points in time, and social actors may have different time preferences. Therefore, two different discount methods are considered. The classical standard discounting model for the technical investment and the hyperbolic discounting for the discounting of the utility of the pilot plant for the households. Four different time preference rates (0%, 1%, 5%, 10%) are used to capture different risk assumptions caused by the current global and local risks (rising energy and food prices, corona pandemic, climate change, water scarcity) and defining thereby the social time preference space. The social return on investment model determines the social return on investment for the households of the village. By rising the time preference rate from 0% to 10% a significant decline of the social benefits of the solar pilot plant can be determined. The global and local risks will rise the time preference rate of the villagers because the present becomes more and more difficult to manage and the visible future is reduced. Hence, the social revenues of the pilot plant decrease over time.

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“…As a result of empirical time anomalies -(climate change, size effects, profit-loss asymmetry, excessive discount rates, dynamic inconsistency (discount rate not constant over time)) -, the hyperbolic discounting approach has been developed (Beck, 2014;Rzeszutek et al, 2023).…”

Section: The Time Preference and The Discount Ratementioning

confidence: 99%

Measuring the Social Welfare of a Solar Power Plant in West Africa - A Social Return on Investment (Sroi) Model

Schlör,

Kuckshinrichs

2023

DIEM Dubrovnik International Economic Meeting

1

0

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The purpose of the paper is to present an example for the electrification of rural Africa. We will discuss the preconditions, necessities and obstacles of building a solar power plant in rural Niger. For the energy supply of a small village in West Africa a solar pilot plant (20 kWp solar plant with battery storage) is installed. This energy hub makes it possible to provide solar-powered electricity for the town, operate a (ground) water pumping system-delivering water for households and for irrigation of fields. The aim of the paper is to determine the social and individual welfare effects of the new energy system. Therefore, the social well-being of the village is analysed by the social return on investment (LSROI) model. The analysis starts with an empirical survey of the households of the village. The villagers were asked to assess the benefits of the new solar power plant investment for their household and for the whole village. Investment and household valuation are intertemporal decisions whose consequences occur at different points in time, and social actors may have different time preferences. Therefore, two different discount methods are considered. The classical standard discounting model for the technical investment and the hyperbolic discounting for the discounting of the utility of the pilot plant for the households. Four different time preference rates (0%, 1%, 5%, 10%) are used to capture different risk assumptions caused by the current global and local risks (rising energy and food prices, corona pandemic, climate change, water scarcity) and defining thereby the social time preference space. The social return on investment model determines the social return on investment for the households of the village. By rising the time preference rate from 0% to 10% a significant decline of the social benefits of the solar pilot plant can be determined. The global and local risks will rise the time preference rate of the villagers because the present becomes more and more difficult to manage and the visible future is reduced. Hence, the social revenues of the pilot plant decrease over time.

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