Intertemporal choice with different short-term and long-term discount factors

Pavlo Blavatskyy

Journal of Mathematical Economics, 2015, vol. 61, issue C, 139-143

Abstract: This paper proposes a new axiomatic model of intertemporal choice that allows for dynamic inconsistency. We weaken the classical assumption of stationarity into two related axioms: stationarity in the short-term and stationarity in the long-term. We obtain a model with two independent discount factors, which is flexible enough to capture different time preferences, including a greater impatience for more immediate outcomes (when a long-term discount factor exceeds a compounded short-term discount factor). Our proposed model can accommodate some experimental results that cannot be rationalized by other existing models of dynamic inconsistency (such as quasi-hyperbolic discounting and generalized hyperbolic discounting).

Keywords: Discounted utility; Time preference; Dynamic consistency; Stationarity; Discount factor; Intertemporal consumption (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:61:y:2015:i:c:p:139-143

DOI: 10.1016/j.jmateco.2015.08.009

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