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Time Consistency: Stationarity and Time Invariance

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  • Yoram Halevy

Abstract

A sequence of experiments documents static and dynamic “preference reversals” between sooner‐smaller and later‐larger rewards, when the sooner reward could be immediate. The theoretically motivated design permits separate identification of time consistent, stationary, and time invariant choices. At least half of the subjects are time consistent, but only three‐quarters of them exhibit stationary choices. About half of subjects with time inconsistent choices have stationary preferences. These results challenge the view that present‐bias preferences are the main source of time inconsistent choices.

Suggested Citation

  • Yoram Halevy, 2015. "Time Consistency: Stationarity and Time Invariance," Econometrica, Econometric Society, vol. 83, pages 335-352, January.
    • Handle: RePEc:wly:emetrp:v:83:y:2015:i::p:335-352
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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • 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
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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