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Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime

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  • Halevy, Yoram

Abstract

A decision maker with time consistent preferences may exhibit diminishing impatience, when uncertain lifetime is accounted for. Uncertain lifetime captures not only the risk of mortality, but also the possibility that a promise for a delayed reward might be breached, or a postponed consumption might not be realized. The restrictions that time consistency imposes on additive intertemporal preferences are characterized. It is shown that if the hazard rate of mortality is diminishing, then a time consistent agent will exhibit diminishing impatience. A demographic model that allows for unobservable heterogeneity in frailty (risk of mortality) accommodates diminishing impatience, even in the presence of stationarity and time consistency.

Suggested Citation

  • Halevy, Yoram, 2004. "Diminishing Impatience: Disentangling Time Preference from Uncertain Lifetime," Microeconomics.ca working papers halevy-04-10-29-09-59-47, Vancouver School of Economics, revised 25 Feb 2014.
  • Handle: RePEc:ubc:pmicro:halevy-04-10-29-09-59-47
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    Cited by:

    1. Li-Wei Chao & Helena Szrek & Nuno Sousa Pereira & Mark V. Pauly, 2009. "Time preference and its relationship with age, health, and survival probability," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(1), pages 1-19, February.
    2. Drouhin, Nicolas, 2015. "A rank-dependent utility model of uncertain lifetime," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 208-224.
    3. Xavier Gabaix & David Laibson, 2017. "Myopia and Discounting," NBER Working Papers 23254, National Bureau of Economic Research, Inc.
    4. repec:ubc:pmicro:yoram_halevy-2012-19 is not listed on IDEAS

    More about this item

    Keywords

    Intertemporal substitution; time consistency; uncertain lifetime; exponential discounting; hyperbolic discounting; frailty; duration models; expectanc;

    JEL classification:

    • 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
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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