Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime
AbstractA decision maker with time consistent preferences may exhibit diminishing impatience, when uncertain lifetime is accounted for. Uncertain lifetime captures not only the risk of mortality, but also the possibility that a promise for a delayed reward might be breached, or a postponed consumption might not be realized. The restrictions that time consistency imposes on additive intertemporal preferences are characterized. It is shown that if the hazard rate of mortality is diminishing, then a time consistent agent will exhibit diminishing impatience. A demographic model that allows for unobservable heterogeneity in frailty (risk of mortality) accommodates diminishing impatience, even in the presence of stationarity and time consistency.
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Bibliographic InfoPaper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000000185.
Date of creation: 18 May 2004
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Other versions of this item:
- Halevy, Yoram, 2004. "Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime," Microeconomics.ca working papers halevy-04-10-29-09-59-47, Vancouver School of Economics, revised 25 Feb 2014.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J10 - Labor and Demographic Economics - - Demographic Economics - - - General
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-04 (All new papers)
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