Discounting and Future Selves
AbstractIs 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 575.
Length: 23 pages
Date of creation: 21 Feb 2002
Date of revision:
Publication status: Published in Journal of Economic Theory, 2005, pages 254-266.
Contact details of provider:
Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
Altruism; Discounting; Dynamic Inconsistency; Welfare ;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-14 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Abel, Andrew B & Bernheim, B Douglas, 1991.
"Fiscal Policy with Impure Intergenerational Altruism,"
Econometric Society, vol. 59(6), pages 1687-1711, November.
- Andrew B. Abel & B. Douglas Bernheim, 1992. "Fiscal Policy With Impure Intergenerational Altruism," NBER Working Papers 2613, National Bureau of Economic Research, Inc.
- Vieille, Nicolas & Weibull, Jörgen W., 2002.
"Uniqueness in Infinitely Repeated Decision Problems,"
Working Paper Series
577, Research Institute of Industrial Economics.
- VIEILLE, Nicolas & WEIBULL, Jörgen W., 2002. "Uniqueness in infinitely repeated decision problems," Les Cahiers de Recherche 755, HEC Paris.
- Nicola Dimitri, 2005. "Time Discounting and Time Consistency," Department of Economics University of Siena 456, Department of Economics, University of Siena.
- Nicola Dimitri, 2005. "Dynamic Consistency in Extensive form Decision Problems," Department of Economics University of Siena 455, Department of Economics, University of Siena.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson).
If references are entirely missing, you can add them using this form.