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Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime

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Author Info
Halevy, Yoram

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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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Publisher Info
Paper provided by Microeconomics.ca Website in its series Micro Theory Working Papers with number halevy-04-10-29-09-59-47.

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Date of creation: 29 Oct 2004
Date of revision: 12 Sep 2005
Handle: RePEc:ubc:pmicro:halevy-04-10-29-09-59-47

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

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
J10 - Labor and Demographic Economics - - Demographic Economics - - - General
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Li-Wei Chao & Helena Szrek & Nuno Sousa Pereira & Mark V. Pauly, 2009. "Time preference and its relationship with age, health, and survival probability," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(1), pages 1-19, February. [Downloadable!]
    Other versions:
  2. Halevy, Yoram, 2004. "Strotz meets Allais: Diminishing Impatience and the Certainty Effect," Micro Theory Working Papers halevy-04-10-29-10-08-43, Microeconomics.ca Website, revised 19 Jun 2008. [Downloadable!]
    Other versions:
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