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Imagine that the hazard rate of a company's bankruptcy decreases over time (e.g. because firms who survive one year tend to be more able to
Imagine that the hazard rate of a company's bankruptcy decreases over time (e.g. because firms who survive one year tend to be more able to survive another year): the chances of bankruptcy drops to 2% in the second year. What would be the amounts in year 1 and 2 which would make you indifferent now? Could you model your preferences using a Quasi- Hyperbolic Discounting model (with parameters and )? What would be the values of these two parameters?
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