Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97239
Authors: 
Galperti, Simone
Strulovici, Bruno
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1571
Abstract: 
This paper argues that, to be forward-looking in a logically consistent sense, a decision maker must take account of his overall well-being, not just his instantaneous utility, in all future periods. However, such a decision-maker is necessarily time inconsistent. The paper explores the relationship between how a decision-maker discounts well-being and how he discounts instantaneous utility. It also provides simple axiomatizations of preferences that exhibit forward-looking behavior, including quasi-hyperbolic discounting (Phelps and Pollack (1968) [18]; Laibson (1997) [12]). Finally, the paper provides a rigorous way to think about welfare criteria in models with time inconsistent agents.
Subjects: 
time inconsistency
forward-looking behavior
hyperbolic discounting
beta-delta discounting
anticipations
welfare criterion
JEL: 
D01
D60
D90
Document Type: 
Working Paper

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