Collective Investment Decision Making with Heterogeneous Time Preferences

Christian Gollier () and Richard Zeckhauser ()

No CESifo Working Paper No. 915, CESifo Working Paper Series from CESifo Group Munich

Abstract: We examine the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. We characterize the properties of efficient allocations of resources and of shadow prices that would decentralize such allocations. We show in particular that the term structure of interest rates is decreasing when all members have DARA preferences. Heterogeneous groups should not use exponential discounting for their collective investment decisions even if all agents discount exponentially.We also exhibit conditions that lead the representative agent to have a rate of impatience that decreases with GDP per capita.

Keywords: aggregation of preferences; hyperbolic discounting; impatience; time preference; investment and consumption (search for similar items in EconPapers)
JEL-codes: D70 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-fin
Date: 2003
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Working Paper: Collective Investment Decision Making with Heterogeneous Time Preferences (2003)
Working Paper: Collective Investment Decision Making with Heterogeneous Time Preferences (2003)
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