Equilibrium Welfare and Government Policy with Quasi-geometric Discounting
We consider a representative-agent equilibrium model where the consumer has quasi geometric discounting and cannot commit to future actions. We restrict attention to a parametric class for preferences and technology and solve for time-consistent competitive equilibria globally and explicitly. We then characterize the welfare properties of competitive equilibria and compare them to that of a planning problem. The planner is a consumer representative who, without commitment but in a time-consistent way, maximizes his presentvalue utility subject to resource constraints. The competitive equilibrium results in strictly higher welfare than does the planning problem whenever the discounting is not geometric.
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Volume (Year): 105 (2002)
Issue (Month): 1 (July)
Pages: 42-72
| Handle: | RePEc:eee:jetheo:v:105:y:2002:i:1:p:42-72 |
| Contact details of provider: | Web page: http://www.elsevier.com/locate/inca/622869
|
References listed on IDEAS
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