Non stationary additive utility and time consistency

Abstract : By solving dynamic optimization programs, I study 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 that time consistency holds if and only if the 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 the "effective consumption profile" of naive, time-inconsistent agents mathematically.
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Submitted on : Tuesday, January 19, 2016 - 11:24:43 AM
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Nicolas Drouhin. Non stationary additive utility and time consistency. 2016. ⟨halshs-01238584v2⟩

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