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Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime

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  • Halevy, Yoram

Abstract

A 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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Bibliographic Info

Paper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number halevy-04-10-29-09-59-47.

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Length: 0 pages
Date of creation: 29 Oct 2004
Date of revision: 25 Feb 2014
Handle: RePEc:ubc:pmicro:halevy-04-10-29-09-59-47

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Web page: http://www.economics.ubc.ca/

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Keywords: Intertemporal substitution; time consistency; uncertain lifetime; exponential discounting; hyperbolic discounting; frailty; duration models; expectanc;

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Cited by:
  1. Halevy, Yoram, 2012. "Time Consistency: Stationarity and Time Invariance," Microeconomics.ca working papers yoram_halevy-2012-19, Vancouver School of Economics, revised 24 Jun 2012.
  2. Li-Wei Chao & Helena Szrek & Nuno Sousa Pereira & Mark V. Pauly, 2007. "Time Preference and Its Relationship with Age, Health, and Survival Probability," CEF.UP Working Papers 0706, Universidade do Porto, Faculdade de Economia do Porto.

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