Past and Future: Backward and Forward Discounting

Debraj Ray, Nikhil Vellodi and Ruqu Wang
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Nikhil Vellodi: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Ruqu Wang: Zhejiang University [Hangzhou, China], Queen's University [Kingston, Canada]

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Abstract: We study a model of time preference in which both current consumption and the memory of past consumption enter "experienced utility"—or the felicity—of an individual. An individual derives overall utility from her own felicity and the anticipated felicities of future selves. These postulates permit an agent to anticipate future regret in current decisions, and generate a set of novel testable implications in line with empirical evidence. The model can be applied to disparate phenomena, including present bias, equilibrium savings behavior, anticipation of regret, and career concerns.

Date: 2024-04
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Published in Journal of the European Economic Association, 2024, 22 (2), pp.837-875. ⟨10.1093/jeea/jvad036⟩

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Journal Article: Past and Future: Backward and Forward Discounting (2024)
Working Paper: Past and Future: Backward and Forward Discounting (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04632104

DOI: 10.1093/jeea/jvad036

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