Quasi-Geometric Discounting: A Closed-Form Solution Under The Exponential Utility Function
AbstractThis paper studies a discrete-time utility maximization problem of an infinitely-lived quasi-geometric consumer whose labor income is subject to uninsurable idiosyncratic productivity shocks. We restrict attention to a first-order Markov recursive solution. We show that under the assumption of the exponential utility function, the problem of the quasi-geometric consumer admits a closed-form solution.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-16.
Length: 11 pages
Date of creation: Apr 2003
Date of revision:
Publication status: Published by Ivie
quasi-geometric (quasi-hyperbolic) discounting; idiosyncratic shocks; closed-form solution;
Other versions of this item:
- Lilia Maliar & Serguei Maliar, 2004. "Quasi-geometric discounting: A closed-form solution under the exponential utility function," Bulletin of Economic Research, Wiley Blackwell, vol. 56(2), pages 201-206, 04.
- 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
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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