Discounting and Future Selves

Maria Saez-Marti and Jörgen Weibull

No 575, Working Paper Series from Research Institute of Industrial Economics

Abstract: Is discounting of future instantaneous utilities consistent with altruism towards future selves? More precisely, can temporal preferences, expressed as a sum of discounted instantaneous utilities, be derived from a representation in the form of a sum of discounted total utilities? We find that a representation in the quasi-exponential (ß,d)-form in Phelps and Pollak (1968) and Laibson (1997) correspond to quasi-exponential altruism towards one's future selves. For ß=1/2, these welfare weights are exponential, while for ß 1/2 in favor of one's future selves. More generally, we establish a functional equation which relates welfare weights to instantaneous-utility weights and apply this equation to a number of examples. We also postulate five desiderata for instantaneous-utility discounting. None of the usual discount functions satisfy all desiderata, but we propose a simple class of discount functions which does.

Keywords: Altruism; Discounting; Dynamic Inconsistency; Welfare (search for similar items in EconPapers)
JEL-codes: D11 D64 D91 E21 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2002-02-21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Journal of Economic Theory, 2005, pages 254-266.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0575

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