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A Reason for Sophisticated Investors not to seize Arbitrage Opportunities in Markets without Frictions

  • Rohde Kirsten I.M.

    (METEOR)

An example shows that for sophisticated consumers with changing preferences it can be perfectly rational not to seize arbitrage opportunities in markets without frictions.

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File URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:49fb1587-96e5-4b1c-8c08-3acbd0caf8d1/datastreams/ASSET1/content
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Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 053.

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Date of creation: 2005
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Handle: RePEc:unm:umamet:2005053
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  1. Per Krusell & Anthony A. Smith, Jr., 2003. "Consumption--Savings Decisions with Quasi--Geometric Discounting," Econometrica, Econometric Society, vol. 71(1), pages 365-375, January.
  2. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  3. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Equilibrium Welfare and Government Policy with Quasi-geometric Discounting," Journal of Economic Theory, Elsevier, vol. 105(1), pages 42-72, July.
  4. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  5. 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.
  6. P. Herings & Kirsten Rohde, 2006. "Time-inconsistent preferences in a general equilibrium model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 591-619, November.
  7. Stefano DellaVigna & Ulrike Malmendier, 2004. "Contract Design and Self-Control: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 353-402.
  8. H. M. Shefrin & Richard Thaler, 1977. "An Economic Theory of Self-Control," NBER Working Papers 0208, National Bureau of Economic Research, Inc.
  9. Christopher Harris & David Laibson, 1999. "Dynamic Choices of Hyperbolic Consumers," Harvard Institute of Economic Research Working Papers 1886, Harvard - Institute of Economic Research.
  10. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
  11. Richard Thaler & Shlomo Benartzi, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments 00337, The Field Experiments Website.
  12. Robert J. Barro, 1999. "Ramsey Meets Laibson in the Neoclassical Growth Model," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1125-1152.
  13. Loewenstein, George & O'Donoghue, Ted & Rabin, Matthew, 2002. "Projection Bias in Predicting Future Utility," Working Papers 02-11, Cornell University, Center for Analytic Economics.
  14. 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.
  15. Liebhafsky, H H, 1969. "New Thoughts About Inferior Goods," American Economic Review, American Economic Association, vol. 59(5), pages 931-34, December.
  16. Erzo G. J. Luttmer & Thomas Mariotti, 2003. "Subjective Discounting in an Exchange Economy," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 959-989, October.
  17. Benhabib, Jess & Bisin, Alberto, 2005. "Modeling internal commitment mechanisms and self-control: A neuroeconomics approach to consumption-saving decisions," Games and Economic Behavior, Elsevier, vol. 52(2), pages 460-492, August.
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