Year: 2013
Type: preprint
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.
Authors: Simone Galperti, Bruno Strulovici
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W301172263