Non stationary additive utility and time consistency

Abstract : By solving dynamic optimization programs, we study the most general class of intertemporal utility functional, that are additive, but not necessarily stationary, nor multiplicatively separating a discount factor from "per period utility". We define the fisherian instantaneous subjective rate of discount as the log-derivative of the marginal utility of consumption. We prove 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 instantaneous subjective rate of discount does not depend on t. The model allows to explain "anomalies in intertemporal choice" and various empirical regularities even when the agent are time consistent. On the other hand, the model allows to characterize mathematically the "effective consumption profile" of naive time inconsistent agent.
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https://halshs.archives-ouvertes.fr/halshs-01238584
Contributor : Nicolas Drouhin <>
Submitted on : Saturday, December 5, 2015 - 8:18:51 PM
Last modification on : Tuesday, January 30, 2018 - 5:50:04 PM
Long-term archiving on : Saturday, April 29, 2017 - 6:35:07 AM

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  • HAL Id : halshs-01238584, version 1

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Nicolas Drouhin. Non stationary additive utility and time consistency. 2015. ⟨halshs-01238584v1⟩

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