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Heterogeneous Impatience of Individual Consumers and Decreasing Impatience of the Representative Consumer

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  • Chiaki Hara

    () (Institute of Economic Research, Kyoto University)

Abstract

In a continuous-time equilibrium model of heterogeneous consumers, we formulate and prove the statement that the more heterogeneous the consumers are in their impatience, the more dynamically consistent the representative consumer is. We apply this result to interest rate models, and, in particular, accommodate heterogeneous impatience in the model of Cox, Ingersoll, and Ross (1985) to come up with a new form of short-rate processes.

Suggested Citation

  • Chiaki Hara, 2019. "Heterogeneous Impatience of Individual Consumers and Decreasing Impatience of the Representative Consumer," KIER Working Papers 1009, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:1009
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP1009.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Discount factor; discount rate; representative consumer; decreasing impatience; cumulant-generating function; term structure of interest rates; short-rate processes;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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