Temporal dominance and relative patience in intertemporal choice
Pavlo Blavatskyy ()
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Pavlo Blavatskyy: Montpellier Business School
Economic Theory, 2018, vol. 65, issue 2, 361-384
Abstract A stream of intertemporal payoffs X first-order (second-order) temporarily dominates another stream Y if (the area below) the cumulative payoff function of X up till any moment of time is always at least as high as that of Y; or, equivalently, any rank-dependent discounted utility maximizer with a strictly increasing (concave) utility function and a strictly decreasing (convex) discount function prefers X over Y. An individual A is relatively more patient than an individual B if, whenever B is willing to undertake some investment project, A is moreover so; or, equivalently, for any stream of payoffs, A’s present-day equivalent is at least as high as that of B; or, equivalently, A’s discount factor is at least as high as that of B and B’s utility function is “more concave” than that of A. Related concepts of absolute patience and comparative probabilistic patience are briefly discussed.
Keywords: Intertemporal choice; Time preference; Discounted utility; Temporal dominance; Relative patience; Dynamic inconsistency; Hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D90 (search for similar items in EconPapers)
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