Kantian optimization with quasi-hyperbolic discounting

Kirill Borissov, Mikhail Pakhnin and Ron Wendner

No 2022-03, Graz Economics Papers from University of Graz, Department of Economics

Abstract: We consider a neoclassical growth model with quasi-hyperbolic discounting under Kantian optimization: each temporal self acts in a way that they would like every future self to act. We introduce the notion of a Kantian policy as an outcome of Kantian optimization in a given class of policies. We derive and characterize a Kantian policy in the class of policies with a constant saving rate for an economy with log-utility and Cobb--Douglas production technology and an economy with isoelastic utility and linear production technology. In all cases, the Kantian saving rate is higher than the saving rate of sophisticated agents, and a Kantian path Pareto dominates a sophisticated path.

Keywords: Quasi-hyperbolic discounting; time inconsistency; kantian equilibrium; sophisticated agents; saving rate; welfare. (search for similar items in EconPapers)
JEL-codes: C70 D15 D91 E21 O40 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-gro, nep-mac and nep-upt
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Related works:
Working Paper: Kantian Optimization with Quasi-Hyperbolic Discounting (2022)
Working Paper: Kantian optimization with quasi-hyperbolic discounting (2022)
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