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Anticipation under lack of commitment leads to excess growth

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  • Gerhard Sorger

Abstract

We study a simple asset accumulation problem in which instantaneous utility depends not only on current consumption but also on anticipated future consumption. This feature of the preferences renders them dynamically inconsistent. We solve the model under the assumptions that the decision maker (i) is aware of the dynamic inconsistency and (ii) lacks commitment power (sophisticated approach). It is shown that asset growth under these assumptions always exceeds the corresponding growth rate under commitment.

Suggested Citation

  • Gerhard Sorger, 2025. "Anticipation under lack of commitment leads to excess growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 21(3), pages 343-359, September.
    • Handle: RePEc:bla:ijethy:v:21:y:2025:i:3:p:343-359
    DOI: 10.1111/ijet.70002
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    References listed on IDEAS

    as
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