Future plans and errors

Pavlo Blavatskyy

Mathematical Social Sciences, 2019, vol. 102, issue C, 85-92

Abstract: Actions chosen today nearly always entail various consequences in the future, which creates a microeconomic problem of intertemporal choice. Preferences over future consumption plans may be inconsistent, imprecise, affected by noise or random errors. Some errors are less likely to happen than the others. A binary choice problem where one intertemporal alternative always (i.e. in every period of time) yields a better consequence than the other arguably leaves very little room for error. This paper presents a microeconomic model of discrete intertemporal choice (which is equivalent to heteroscedastic probit/logit) that rules out such unlikely errors (i.e. violations of period-wise monotonicity).

Keywords: Intertemporal choice; Time preference; Discounted utility; Random errors; Probabilistic choice (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:102:y:2019:i:c:p:85-92

DOI: 10.1016/j.mathsocsci.2019.08.001

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