Age-induced acceleration of time: Implications for intertemporal choice
Journal of Economic Behavior & Organization, 2018, vol. 153, issue C, 143-152
Our perception of time is both nonlinear and nonstationary, which makes preference reversals possible. I decompose the sources of dynamic inconsistency into a time acceleration effect and a time compression effect. Standard economic models focus only on the second effect. I show that when the perceived flow of time accelerates with age, the two effects can offset each other for hyperbolic discounters but not for exponential discounters. Such hyperbolic discounters would report discount rates that seem to imply dynamic inconsistency but would nonetheless manifest dynamic consistency in actual choices over time.
Keywords: Age; Discounting; Dynamic consistency; Hyperbolic; Intertemporal choice; Preference reversals; Time (search for similar items in EconPapers)
JEL-codes: A12 C91 D91 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:153:y:2018:i:c:p:143-152
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