IDEAS home Printed from https://ideas.repec.org/p/cla/levarc/625018000000000251.html
   My bibliography  Save this paper

Consumption Savings Decisions with Quasi-Geometric Discounting

Author

Listed:
  • Per Krusell
  • Anthony A Smith, Jr.

Abstract

How do individuals with time-inconsistent preferences make consumption-savings decisions? We try to answer this question by considering the simplest possible form of consumption-savings problem, assuming that discounting is quasi-geometric. A solution to the decision problem is then a subgame-perfect equilibrium of a dynamic game between the individual's ?successive selves?. When the time horizon is finite, our question has a well-defined answer in terms of primitives. When the time horizon is infinite, we are left without a sharp answer: we cannot rule out the possibility that two identical individuals in the exact same situation make different decisions! In particular, there is a continuum of dynamic equilibria even if we restrict attention to equilibria where current consumption decisions depend only on current wealth.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Per Krusell & Anthony A Smith, Jr., 2001. "Consumption Savings Decisions with Quasi-Geometric Discounting," Levine's Working Paper Archive 625018000000000251, David K. Levine.
    • Handle: RePEc:cla:levarc:625018000000000251
    as

    Download full text from publisher

    File URL: http://www.dklevine.com/archive/refs4625018000000000251.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Geir B. Asheim, 1997. "Individual and Collective Time-Consistency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 427-443.
    2. Jose-Victor Rios-Rull & Per Krusell, 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model," American Economic Review, American Economic Association, vol. 89(5), pages 1156-1181, December.
    3. Asheim, G., 1991. "Individual and Collective Time Consistency," Other publications TiSEM b8d92334-24dd-423f-a9b8-c, Tilburg University, School of Economics and Management.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
    2. Ales, Laurence & Sleet, Christopher, 2014. "Revision proofness," Journal of Economic Theory, Elsevier, vol. 152(C), pages 324-355.
    3. Nathalie Etchart, 2002. "Adequate Moods for non-eu Decision Making in a Sequential Framework," Theory and Decision, Springer, vol. 52(1), pages 1-28, February.
    4. Spyros Galanis & Christos A Ioannou & Stelios Kotronis, 2024. "Information Aggregation Under Ambiguity: Theory and Experimental Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(6), pages 3423-3467.
    5. Geir B. Asheim, 1997. "Individual and Collective Time-Consistency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 427-443.
    6. Tyson, Christopher J., 2008. "Management of a capital stock by Strotz's naive planner," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2214-2239, July.
    7. Pan, Jinrui & Webb, Craig S. & Zank, Horst, 2015. "An extension of quasi-hyperbolic discounting to continuous time," Games and Economic Behavior, Elsevier, vol. 89(C), pages 43-55.
    8. Ana Brasao, 2000. "Management of Southern Atlantic bluefin tuna: the time consistency of the cooperative management solution," Nova SBE Working Paper Series wp377, Universidade Nova de Lisboa, Nova School of Business and Economics.
    9. Nicolas Vieille & Jörgen Weibull, 2002. "Uniqueness in infinitely repeated decision problems," Working Papers hal-00593648, HAL.
    10. Nicolas Vieille & Jörgen Weibull, 2009. "Multiple solutions under quasi-exponential discounting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(3), pages 513-526, June.
    11. Geir B. Asheim & Kuntal Banerjee & Tapan Mitra, 2021. "How stationarity contradicts intergenerational equity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(2), pages 423-444, September.
    12. Asheim, G., 1991. "Individual and Collective Time Consistency," Other publications TiSEM b8d92334-24dd-423f-a9b8-c, Tilburg University, School of Economics and Management.
    13. Marco Bassetto & Zhen Huo & José-Víctor Ríos-Rull, 2018. "Organizational Equilibrium with Capital," NBER Working Papers 25376, National Bureau of Economic Research, Inc.
    14. Nabil I. Al-Najjar & Ramon Casadesus-Masanell & Emre Ozdenoren, 1999. "Subjective Representation of Complexity," Discussion Papers 1249, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    15. Asheim, Geir B., 2007. "Procrastination, partial naivete, and behavioral welfare analysis," Memorandum 02/2007, Oslo University, Department of Economics.
    16. Nesje, Frikk, 2024. "Cross-dynastic intergenerational altruism," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    17. Webb, Craig S., 2016. "Continuous quasi-hyperbolic discounting," Journal of Mathematical Economics, Elsevier, vol. 64(C), pages 99-106.
    18. Yu-Jui Huang & Zhou Zhou, 2017. "Optimal Equilibria for Time-Inconsistent Stopping Problems in Continuous Time," Papers 1712.07806, arXiv.org, revised Oct 2018.
    19. Kodritsch, Sebastian, 2015. "A note on the welfare of a sophisticated time-inconsistent decision-maker," Discussion Papers, Research Unit: Market Behavior SP II 2015-201, WZB Berlin Social Science Center.
    20. Koch, Alexander K. & Nafziger, Julia & Suvorov, Anton & van de Ven, Jeroen, 2014. "Self-rewards and personal motivation," European Economic Review, Elsevier, vol. 68(C), pages 151-167.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cla:levarc:625018000000000251. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David K. Levine (email available below). General contact details of provider: http://www.dklevine.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.