Time-inconsistent preferences and time-inconsistent policies

Nick Guo () and Frank Caliendo

Journal of Mathematical Economics, 2014, vol. 51, issue C, 102-108

Abstract: Social security is commonly viewed as a commitment device for hyperbolic consumers. We argue that such common intuition is not consistent with formal economic theory. In a model where the government can choose either time-consistent or time-inconsistent policies to govern its social security arrangement and credit markets are complete, only a time-inconsistent policy achieves true commitment by hyperbolic consumers. This rules out a traditional social security program as a commitment device.

Keywords: Time-inconsistent preferences; Time-inconsistent policies; Social security (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:51:y:2014:i:c:p:102-108

DOI: 10.1016/j.jmateco.2014.01.007

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