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Non stationary additive utility and time consistency

Nicolas Drouhin ()

Working Papers from HAL

Abstract: Within a continuous time life cycle model of consumption and savings, I study the properties of the most general class of additive intertemporal utility functionals. They are not necessarily stationary, and do not necessarily multiplicatively separate a discount factor from \per-period utility". I prove rigorously that time consistency holds if and only if the per-period felicity function is multiplicatively separable in t, the date of decision and in s, the date of consumption, or equivalently, if the Fisherian instantaneous subjective discount rate does not depend on t. The model allows to explain \anomalies in intertemporal choice" and various empirical regularities, even when the agents are time consistent. On the other hand, the model allows to characterize mathematically the \effective consumption pro le" of naive, time-inconsistent agents.

Keywords: exponential discounting; time invariance; hyperbolic discounting; aging; time consistency; stationarity of preferences; life cycle theory of consumption and savings; time discounting; anomalies in intertemporal choice (search for similar items in EconPapers)
Date: 2019-05-29
New Economics Papers: this item is included in nep-dge, nep-mic and nep-upt
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Journal Article: Non-stationary additive utility and time consistency (2020) Downloads
Working Paper: Non-stationary additive utility and time consistency (2020) Downloads
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