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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Date of creation: 29 Oct 2004
Date of revision: 25 Feb 2014
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Intertemporal substitution; time consistency; uncertain lifetime; exponential discounting; hyperbolic discounting; frailty; duration models; expectanc;
Other versions of this item:
- Yoram Halevy, 2004. "Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime," Levine's Bibliography 122247000000000185, UCLA Department of Economics.
- 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-HEA-2004-11-07 (Health Economics)
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