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Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference

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  • Abi Adams
  • Laurens Cherchye
  • Bram De Rock
  • Ewout Verriest

Abstract

We develop a revealed preference methodology that allows us to explore whether time inconsistencies in household choice are the product of individual preference nonstationarities or the result of individual heterogeneity and renegotiation within the household. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the observed behavior to be rationalized by a theory that assumes preference stationarity at the individual level. The methodology created in this paper also facilitates the recovery of theory-consistent discount rates for each individual within particular household under study. (JEL E24, F13, F16)

Suggested Citation

  • Abi Adams & Laurens Cherchye & Bram De Rock & Ewout Verriest, 2014. "Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference," American Economic Review, American Economic Association, vol. 104(12), pages 4147-4183, December.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:12:p:4147-83
    Note: DOI: 10.1257/aer.104.12.4147
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    References listed on IDEAS

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    Cited by:

    1. Abi Adams & Laurens Cherchye & Bram De Rock & Ewout Verriest, 2014. "Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference," American Economic Review, American Economic Association, vol. 104(12), pages 4147-4183, December.
    2. Kircher, Philipp & Marzilli Ericson, Keith & Spinnewijn, Johannes & Starc, Amanda, 2015. "Inferring Risk Perceptions and Preferences using Choice from Insurance Menus: Theory and Evidence," CEPR Discussion Papers 10981, C.E.P.R. Discussion Papers.
    3. Martin Browning & Ian Crawford & Laura Blow, 2017. "Nonparametric Analysis of Time-Inconsistent Preferences," Economics Series Working Papers 835, University of Oxford, Department of Economics.
    4. Vittorio Bassi & Imran Rasul, 2017. "Persuasion: A Case Study of Papal Influences on Fertility-Related Beliefs and Behavior," American Economic Journal: Applied Economics, American Economic Association, vol. 9(4), pages 250-302, October.
    5. Antony Millner & Geoffrey Heal, 2016. "Collective Intertemporal Choice: the Possibility of Time Consistency," NBER Working Papers 22524, National Bureau of Economic Research, Inc.
    6. Antony Millner & Geoffrey Heal, 2015. "Collective intertemporal choice: time consistency vs. time invariance," GRI Working Papers 220, Grantham Research Institute on Climate Change and the Environment.
    7. repec:eee:trapol:v:59:y:2017:i:c:p:181-195 is not listed on IDEAS
    8. Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2014. "Household consumption when marriage is stable," IFS Working Papers W14/26, Institute for Fiscal Studies.
    9. Hubner, Stefan, 2016. "Topics in nonparametric identification and estimation," Other publications TiSEM 08fce56b-3193-46e0-871b-0, Tilburg University, School of Economics and Management.
    10. Laura Blow & Martin Browning & Ian Crawford, 2014. "Never mind the hyperbolics: nonparametric analysis of time-inconsistent preferences," IFS Working Papers W14/17, Institute for Fiscal Studies.
    11. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 0. "Transitivity of preferences: when does it matter?," Theoretical Economics, Econometric Society.
    12. Dubois, Pierre & Griffith, Rachel & O'Connell, Martin, 2017. "How well targeted are soda taxes?," TSE Working Papers 17-868, Toulouse School of Economics (TSE).
    13. Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2017. "Household Consumption When the Marriage Is Stable," American Economic Review, American Economic Association, vol. 107(6), pages 1507-1534, June.
    14. Laurens CHERCHYE & Thomas DEMUYNCK & Bram DE ROCK, 2010. "Noncooperative household consumption with caring," Working Papers Department of Economics ces10.34, KU Leuven, Faculty of Economics and Business, Department of Economics.
    15. Bram De Rock & Bart Capéau, 2015. "The implications of household size and children for life-cycle saving," Working Paper Research 286, National Bank of Belgium.
    16. Salvador Bertomeu & Antonio Estache, 2016. "Unbundling Political and Economic Rationality: a Non-Parametric Approach Tested on Spain," Working Papers ECARES ECARES 2016-17, ULB -- Universite Libre de Bruxelles.
    17. Antony Millner & Geoffrey Heal, 2014. "Resolving intertemporal conflicts: Economics vs. Politics," GRI Working Papers 173, Grantham Research Institute on Climate Change and the Environment.
    18. Mohammed Abdellaoui & Olivier l'Haridon & Corina Paraschiv, 2013. "Do Couples Discount Future Consequences Less than Individuals?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201320, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    19. repec:bpj:jossai:v:4:y:2016:i:1:p:24-39:n:2 is not listed on IDEAS
    20. Rosangela Bando & Claudia Uribe, 2016. "Experimental Evidence on Credit Constraints," IDB Publications (Working Papers) 7491, Inter-American Development Bank.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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