Dynamic choices of hyperbolic consumers: the continuous time case

Ivar Ekeland and Lazrak Ali ()
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Lazrak Ali: Sauder school of business university of british columbia

No 822, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: This paper characterizes the set of differentiable subgame perfect equilibria in a continuous time intertemporal decision optimization problem with non-constant discounting. The idea of an infinitesimal self is formalized and the equilibrium characterization takes the form of an integral equation (IE) which is reminiscent of the Hamilton-Jacobi-Bellman equation. Beginning with a local existence proof of IE, we analyze some equilibria of the consumption saving problem. We then use the equation IE to suggest a critical indeterminacy in the Ramsey growth model with non-constant discounting

Keywords: Hyperbolic discount; consumption saving decision; growth theory (search for similar items in EconPapers)
JEL-codes: D91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm
Date: 2006-12-03

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