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Quasi-geometric discounting: A closed-form solution under the exponential utility function

  • Lilia Maliar
  • Serguei Maliar

This paper studies a discrete-time utility maximization problem of an infinitely-lived quasi-geometric consumer whose labour 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. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2004.

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Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 56 (2004)
Issue (Month): 2 (04)
Pages: 201-206

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Handle: RePEc:bla:buecrs:v:56:y:2004:i:2:p:201-206
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  1. Caballero, Ricardo J., 1990. "Consumption puzzles and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 113-136, January.
  2. Per Krusell & Burhanettin Kuruscu & Anthony A. Smtih, Jr., . "Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting," GSIA Working Papers 2001-06, Carnegie Mellon University, Tepper School of Business.
  3. Per Krusell & Anthony A Smith, Jr., 2001. "Consumption Savings Decisions with Quasi-Geometric Discounting," NajEcon Working Paper Reviews 625018000000000251,
  4. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  5. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-57, July.
  6. Erzo G. J. Luttmer & Thomas Mariotti, 2003. "Subjective Discounting in an Exchange Economy," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 959-989, October.
  7. repec:tpr:qjecon:v:114:y:1999:i:4:p:1125-1152 is not listed on IDEAS
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