An Investigation of Time Consistency for Subjective Discontinued Utility
A well-known common agreement in decision theory is that only exponential decision makers are time consistent i.e. with the mere passage of time, future choices must not contradict the initial choice. Building on this result, a large range of works has studied time inconsistency as a direct application of hyperbolic discounting. These articles share the common objective time assumption under which decision makers have a perfect perception of future periods. This paper firstly highlights that, when no further condition than separability is mentioned, any discount mechanism is compatible with time consistency. Then, we investigate time consistency assuming that individual time perception may be submitted to time distortion. In particular, an axiomatic discounting model called Subjective Discounted Utility (SDU) is provided to illustrate how hyperbolic decision makers may be time consistent.
|Date of creation:||Jan 2012|
|Contact details of provider:|| Web page: http://www.amse-aixmarseille.fr/en|
More information through EDIRC
References listed on IDEAS
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.:
- Gary S. Becker & Kevin M. Murphy, 1986.
"A Theory of Rational Addiction,"
University of Chicago - George G. Stigler Center for Study of Economy and State
41, Chicago - Center for Study of Economy and State.
- George Loewenstein & Richard H Thaler, 2003. "Anomalies: Intertemporal Choice," Levine's Working Paper Archive 618897000000000784, David K. Levine.
- Itzhak Gilboa, 1989.
"Expectation and Variation in Multi-Period Decisions,"
- Gilboa, Itzhak, 1989. "Expectation and Variation in Multi-period Decisions," Econometrica, Econometric Society, vol. 57(5), pages 1153-69, September.
- Nicolas Drouhin, 2009.
"Hyperbolic discounting may be time consistent,"
AccessEcon, vol. 29(4), pages 2549-2555.
- Nicolas Drouhin, 2009. "Hyperbolic discounting may be time consistent," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633177, HAL.
- Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
- George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 573-597.
- Christopher Harris & David Laibson, 1999.
"Dynamic Choices of Hyperbolic Consumers,"
Harvard Institute of Economic Research Working Papers
1886, Harvard - Institute of Economic Research.
- Fishburn, Peter C & Rubinstein, Ariel, 1982. "Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 677-94, October.
- De Waegenaere, Anja & Wakker, Peter P., 2001. "Nonmonotonic Choquet integrals," Journal of Mathematical Economics, Elsevier, vol. 36(1), pages 45-60, September.
- Laibson, David I., 1997.
"Golden Eggs and Hyperbolic Discounting,"
4481499, Harvard University Department of Economics.
- Drazen Prelec, 2004. "Decreasing Impatience: A Criterion for Non-stationary Time Preference and "Hyperbolic" Discounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 511-532, October.
- Bleichrodt, Han & Rohde, Kirsten I.M. & Wakker, Peter P., 2009. "Non-hyperbolic time inconsistency," Games and Economic Behavior, Elsevier, vol. 66(1), pages 27-38, May.
- Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
- Chateauneuf, Alain & Rebille, Yann, 2004. "Some characterizations of non-additive multi-period models," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 235-250, November.
- Burness, H Stuart, 1976. "On the Role of Separability Assumptions in Determining Impatience Implications," Econometrica, Econometric Society, vol. 44(1), pages 67-78, January.
- Harvey, Charles M., 1994. "The reasonableness of non-constant discounting," Journal of Public Economics, Elsevier, vol. 53(1), pages 31-51, January.
- André Lapied & Olivier Renault, 2012. "A subjective discounted utility model," Economics Bulletin, AccessEcon, vol. 32(2), pages 1171-1179.
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1210. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yves Doazan)
If references are entirely missing, you can add them using this form.