# On time-consistent policy rules for heterogeneous discounting programs

*Jean-Pierre Drugeon* and
*Bertrand Wigniolle*

*Journal of Mathematical Economics*, 2016, vol. 63, issue C, 174-187

**Abstract:**
This article considers a new concept of social optimum for an economy populated by agents with heterogeneous discount factors. It is based upon an approach that constrains decision rules to be temporally consistent: these are stationary and unequivocally ruled by the state variable. For agents who differ only in their discount factors and have equal weights in the planner’s objective, the temporally-consistent optimal solution produces identical consumption for the agents at all time periods. In the long run, the capital stock is determined by a modified golden rule that corresponds to an average-like summation of all discount factors. The general argument is illustrated by various two-agent examples that allow for an explicit determination of the temporally consistent decision rules. Interestingly, this temporally consistent solution can be simply recovered from the characterization of a social planner’s problem with variable discounting and can also be decentralized as a competitive equilibrium through the use of various instruments.

**Keywords:** Time-consistent policy rules; Heterogeneous discounting programs (search for similar items in EconPapers)

**Date:** 2016

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**Related works:**

Working Paper: On time-consistent policy rules for heterogeneous discounting programs (2016)

Working Paper: On time-consistent policy rules for heterogeneous discounting programs (2016)

Working Paper: On time-consistent policy rules for heterogeneous discounting programs (2016)

Working Paper: On time-consistent policy rules for heterogeneous discounting programs (2016)

Working Paper: On Time-Consistent Policy Rules for Heterogeneous Discounting Programs (2015)

Working Paper: On Time-Consistent Policy Rules for Heterogeneous Discounting Programs (2015)

Working Paper: On Time-Consistent Policy Rules for Heterogeneous Discounting Programs (2015)

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**Persistent link:** https://EconPapers.repec.org/RePEc:eee:mateco:v:63:y:2016:i:c:p:174-187

**DOI:** 10.1016/j.jmateco.2016.01.006

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