Consumption-Savings Decisions with Quasi-Geometric Discounting
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.
|Date of creation:||Jan 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Asheim, G.B., 1996.
"Individual and Collective Time-Consistency,"
20/1996, Oslo University, Department of Economics.
- Geir B. Asheim, 1995. "Individual and Collective Time-Consistency," Discussion Papers 1128, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Asheim, G., 1991. "Individual and Collective Time Consistency," Discussion Paper 1991-69, Tilburg University, Center for Economic Research.
- Asheim, G.B., 1991. "Individual and Collective Time Consistency," Papers 9169, Tilburg - Center for Economic Research.
- Per Krusell & Jose-Victor Rios-Rull, 1997.
"On the size of U.S. government: political economy in the neoclassical growth model,"
234, Federal Reserve Bank of Minneapolis.
- 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.
This item is featured on the following reading lists or Wikipedia pages:
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2651. 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: ()
If references are entirely missing, you can add them using this form.