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 Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 198.
Date of creation: 2003
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Other versions of this item:
- Christian Gollier & Richard Zeckhauser, 2003. "Collective Investment Decision Making with Heterogeneous Time Preferences," CESifo Working Paper Series 915, CESifo Group Munich.
- Christian Gollier & Richard Zeckhauser, 2003. "Collective Investment Decision Making with Heterogeneous Time Preferences," NBER Working Papers 9629, National Bureau of Economic Research, Inc.
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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