Collective Investment Decision Making with Heterogeneous Time Preferences
AbstractWe examine the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. We characterize the properties of efficient allocations of resources and of shadow prices that would decentralize such allocations. We show in particular that the term structure of interest rates is decreasing when all members have DARA preferences. Heterogeneous groups should not use exponential discounting for their collective investment decisions even if all agents discount exponentially.We also exhibit conditions that lead the representative agent to have a rate of impatience that decreases with GDP per capita.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 915.
Date of creation: 2003
Date of revision:
aggregation of preferences; hyperbolic discounting; impatience; time preference; investment and consumption;
Other versions of this item:
- Gollier, Christian & Zeckhauser, Richard, 2003. "Collective Investment Decision Making with Heterogeneous Time Preferences," IDEI Working Papers 198, Institut d'Économie Industrielle (IDEI), Toulouse.
- Christian Gollier & Richard Zeckhauser, 2003. "Collective Investment Decision Making with Heterogeneous Time Preferences," NBER Working Papers 9629, National Bureau of Economic Research, Inc.
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-02 (All new papers)
- NEP-CDM-2004-05-02 (Collective Decision-Making)
- NEP-FIN-2004-05-02 (Finance)
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