Welfare implications of non-unitary time discounting

Ryoji Ohdoi and Koichi Futagami

Theory and Decision, 2021, vol. 90, issue 1, No 5, 85-115

Abstract: Abstract This study proposes a model of non-unitary time discounting and examines its welfare implications. A key feature of our model lies in the disparity of time discounting between multiple distinct goods, which induces an individual’s preference reversals even though she normally discounts her future utilities for each good. After characterizing the time-consistent decision-making by such an individual, we compare welfare achieved in the market economy and welfare in the planner’s allocation from the perspective of all selves across time. Under certain situations, the selves in early periods strictly prefer the social planner’s allocation, whereas the selves in future periods strictly prefer the market equilibrium. Therefore, the welfare implications of our model are quite different from those in the canonical discounting model and in models of other time-inconsistent preferences.

Keywords: Non-unitary time discounting; Time inconsistency; Intertemporal choice; Intrapersonal game; Time-consistent tax policy (search for similar items in EconPapers)
Date: 2021
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Working Paper: Welfare Implications of Non-unitary Time Discounting (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:theord:v:90:y:2021:i:1:d:10.1007_s11238-020-09766-0

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DOI: 10.1007/s11238-020-09766-0

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