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Quasi-Geometric Discounting: A Closed-Form Solution Under The Exponential Utility Function

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  • Lilia Maliar

    ()
    (Universidad de Alicante)

  • Serguei Maliar

    (Universidad de Alicante)

Abstract

This 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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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-16.pdf
File Function: Fisrt version / Primera version, 2003
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-16.

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Length: 11 pages
Date of creation: Apr 2003
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2003-16

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Keywords: quasi-geometric (quasi-hyperbolic) discounting; idiosyncratic shocks; closed-form solution;

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References

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  1. Per Krusell & Anthony A. Smith, Jr., . "Consumption-Savings Decisions with Quasi-Geometric Discounting," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 2001-05, Carnegie Mellon University, Tepper School of Business.
  2. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(2), pages 443-77, May.
  3. Per Krusell & Burhanettin Kuruscu & Anthony A. Smith Jr., 2001. "Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 413, Bank of Italy, Economic Research and International Relations Area.
  4. Christopher Harris & David Laibson, 1999. "Dynamic Choices of Hyperbolic Consumers," Harvard Institute of Economic Research Working Papers 1886, Harvard - Institute of Economic Research.
  5. Caballero, Ricardo J., 1990. "Consumption puzzles and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 113-136, January.
  6. Erzo G. J. Luttmer & Thomas Mariotti, 2003. "Subjective Discounting in an Exchange Economy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(5), pages 959-989, October.
  7. Robert J. Barro, 1999. "Ramsey Meets Laibson In The Neoclassical Growth Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1125-1152, November.
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Cited by:
  1. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(2), pages 443-77, May.
  2. Viola Angelini & Peter Simmons, . "Housing Debt and Consumption," Discussion Papers 11/20, Department of Economics, University of York.

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