Consumption-Savings Decisions with Quasi-Geometric Discounting

Anthony A Smith
Authors registered in the RePEc Author Service: Per Krusell

No 2651, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How do individuals with time-inconsistent preferences make consumption-savings decisions? We try to answer this question by considering the simplest possible form of consumption-savings problem, assuming that discounting is quasi-geometric. A solution to the decision problem is then a subgame-perfect equilibrium of a dynamic game between the individual's ?successive selves?. When the time horizon is finite, our question has a well-defined answer in terms of primitives. When the time horizon is infinite, we are left without a sharp answer: we cannot rule out the possibility that two identical individuals in the exact same situation make different decisions! In particular, there is a continuum of dynamic equilibria even if we restrict attention to equilibria where current consumption decisions depend only on current wealth.

Keywords: Quasi-geometric discounting; Time inconsistency; Indeterminacy (search for similar items in EconPapers)
JEL-codes: C73 D90 E21 (search for similar items in EconPapers)
Date: 2001-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Related works:
Journal Article: Consumption--Savings Decisions with Quasi--Geometric Discounting (2003)
Working Paper: Consumption Savings Decisions with Quasi-Geometric Discounting (2001)
Working Paper: Consumption Savings Decisions with Quasi-Geometric Discounting (2001)
Working Paper: Consumption-Savings Decisions with Quasi-Geometric Discounting
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